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*                       FIEND'S SUPERBEAR MARKET REPORT                     *

*                                October 30, 2026                           *

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*                       e-mail: fiendbear@fiendbear.com                     *

*                    web address: http://www.fiendbear.com                  *

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Fiend Commentary
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October Saves Its Scare for Last

October apparently decided to wait until Halloween to frighten Wall Street.

Thursday's trading was already uncomfortable, with the Nasdaq falling 1.4% and Alphabet suffering a spectacular 12.6% decline that erased approximately $500 billion in market value. The S&P 500 and Dow held up considerably better, while the Russell 2000 actually gained 1%.

Then came the after-hours earnings reports.

Amazon fell more than 7%, Intel plunged over 20%, and Nasdaq futures dropped roughly 2%. The selling spread into Asian technology markets, with South Korea's KOSPI falling about 5% and Japan's Nikkei losing around 3%.

Gold slipped below $4,000, silver continued retreating toward $50, and Bitcoin suffered another round of heavy selling.

Meanwhile, Treasury yields plunged and the dollar weakened.

Just when it appeared October might escape without a major disturbance, investors suddenly discovered several reasons to become nervous.

The economy is growing. Inflation is accelerating. And the companies responsible for much of the stock market's remarkable performance are beginning to disappoint.

Strong GDP, Weakening Foundations

Thursday's economic reports delivered an interesting contradiction.

Third-quarter GDP increased at a 3.4% annualized rate, exceeding expectations of 3.2%. That is impressive growth considering expensive energy, high borrowing costs and weakening employment.

But look at what produced it.

Consumer spending increased 3.8%, while business equipment investment surged an extraordinary 20.9%. Much of that investment involved computers and other equipment associated with the AI boom.

Equipment spending alone contributed approximately 1.2 percentage points to GDP growth.

That is a substantial portion of the entire expansion.

The problem is that the companies making those investments are now facing growing questions about whether the expenditures will generate adequate returns.

Alphabet's disappointing earnings and negative cash flow sent its shares plunging Thursday. Amazon followed with another warning about enormous spending requirements. Intel reported continuing cash consumption and manufacturing problems.

The market has spent much of the year rewarding technology companies for announcing larger AI investments.

Now investors are beginning to ask how much those investments will eventually earn.

That is a fundamental change.

If the AI spending boom begins slowing, the consequences could extend beyond technology valuations. Equipment manufacturers, construction companies, utilities and suppliers have all benefited from the investment surge.

A significant slowdown would also remove an important source of economic growth.

Yesterday's capital expenditures helped produce Thursday's impressive GDP report. Tomorrow's reduced spending could produce a considerably different one.

Inflation Isn't Improving

The other economic report was hardly reassuring.

September PCE inflation rose 0.5% for the month and 3.6% annually, up from 3.4% in August.

Core PCE accelerated to 3.1%.

Those numbers reinforce the earlier CPI and PPI reports, both of which showed inflation moving farther away from the Fed's 2% objective.

Yet Thursday's data did little to change expectations for December's Federal Reserve meeting. Futures continued assigning roughly an 83% probability to another quarter-point increase.

Kevin Warsh may have successfully convinced markets that the Fed intends to remain patient regardless of the latest inflation numbers.

That patience is beginning to look increasingly questionable.

The Fed has raised rates only 25 basis points this year while inflation has accelerated and oil has remained extraordinarily expensive.

Perhaps another quarter point in December will be enough.

But it is difficult to see what has fundamentally improved in the inflation outlook.

One troubling detail from the GDP report deserves attention. Although consumer spending was strong for the quarter, inflation-adjusted spending was unchanged in September, while real disposable income declined 0.3%.

The savings rate also fell to 3.8%.

Consumers are spending, but their ability to sustain that spending is becoming more questionable.

Higher prices are consuming a larger portion of household income while much of the investment boom remains concentrated in a handful of enormous companies.

That is not necessarily a recessionary economy.

It is an increasingly uneven one.

Why Are Bonds So Strong?

The Treasury market provided perhaps the most interesting reaction.

Despite stronger-than-expected GDP and another acceleration in inflation, the 10-year Treasury yield fell below 5% Thursday and moved toward 4.9% overnight.

Earlier this month it approached 5.4%, while the 30-year briefly traded above 5.7%.

That is an enormous reversal.

The bond market is on course for its strongest monthly performance in nearly three years.

It is difficult to attribute this rally to improving inflation when the latest reports show the opposite.

A more convincing explanation is that investors are becoming worried about future economic growth and the consequences of the technology selloff.

If AI spending slows, employment continues weakening and consumers begin cutting back, the Fed may eventually find itself unable to continue raising rates.

In that environment, Treasury bonds become attractive even while current inflation remains elevated.

The weaker dollar reinforces the possibility that investors are reducing expectations for future monetary tightening.

But there is an important distinction.

Falling yields because inflation is under control would be bullish. Falling yields because investors fear an economic slowdown is something else entirely.

The market may be moving from worrying about inflation to worrying about the damage already caused by inflation and high financing costs.

That would be a much less comfortable transition.

The Metals Cannot Find Support

Gold and silver have also struggled to make sense of the changing environment.

Gold is again testing $4,000, while silver has approached $50 for the first time in nearly a year.

That is particularly disappointing considering the substantial decline in Treasury yields and recent weakness in the dollar.

Normally, those conditions would provide support for precious metals.

Instead, selling has continued.

The explanation may be as simple as investors unwinding speculative positions and protecting profits accumulated during the extraordinary advances earlier this year.

Silver's collapse from its January peak has been especially severe, although prices remain considerably above their historical trading range.

The critical question now is whether gold can establish support around $4,000 and silver around $50.

A sustained break could invite another wave of selling.

On the other hand, after months of declines, the metals may be approaching levels where longer-term investors finally become interested again.

So far, buyers have shown little urgency.

And Then Come the Midterms

All of this is happening just days before Tuesday's midterm elections.

Democrats are heavily favored to win control of the House, with prediction markets assigning probabilities above 90%. The Senate is less certain, although Democrats are also favored in several forecasts.

A Democratic sweep would transform the political environment for the remaining two years of the Trump administration.

Major spending initiatives and tax legislation would face substantially greater resistance. Congressional oversight would intensify, and divided government could produce prolonged budget confrontations.

Wall Street might welcome some restraint on additional spending, particularly after the extraordinary increase in federal debt.

But political gridlock does not automatically reduce deficits. Existing spending commitments and interest expenses would remain enormous.

There is also the unresolved Middle East situation.

Oil remains above $100, with Brent around $115, as renewed attacks and speculation about additional military action following the elections keep energy markets nervous.

A diplomatic breakthrough could provide considerable relief.

Another escalation could send oil sharply higher again, creating exactly the kind of additional inflationary pressure the Fed appears reluctant to confront.

The election outcome may be largely anticipated, but the economic and geopolitical consequences are not.

October's Final Warning

It would be premature to declare the entire stock market in trouble.

Despite Thursday's technology selloff, smaller stocks performed relatively well. The Russell 2000 gained 1%, suggesting some money may be rotating out of expensive technology rather than leaving equities altogether.

That is encouraging.

But the overnight losses in technology are becoming difficult to ignore.

The S&P 500 is extraordinarily concentrated in a handful of companies whose valuations depend on exceptional growth and enormous continuing investments in AI.

If investors begin questioning the profitability of those investments, the index could suffer substantially even while many ordinary stocks hold up reasonably well.

That is the concentration risk we discussed earlier this month.

October began with fears of 6% Treasury yields.

It is ending with yields below 5%, inflation still accelerating, oil above $100 and technology investors increasingly worried about the cost of the AI boom.

Gold, silver and Bitcoin are also under considerable pressure.

And Tuesday's elections could introduce an entirely new set of uncertainties.

There is a certain irony in the timing.

For most of October, investors worried that high interest rates would finally break the stock market.

Now interest rates are falling sharply.

And the part of the stock market that was supposed to benefit most is beginning to crack.

Perhaps October's real scare was simply delayed until the last trading day.

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