Proflex Market Update - Wk 43

MAG7 Earnings | FOMC Watch | Bitcoin's Relentless Ascent

Last week, the US stock markets showed strong gains with record closes. The S&P 500 rose 0.7% to close at 6,791.69, hitting a new intraday high of 6,807.11.
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The upcoming week ahead is monumental, with five of the Magnificent Seven reporting earnings and the FOMC meeting on Wednesday, alongside crucial China trade talks.

The market is basking in a perceived "goldilocks" scenario, where easing money conditions continue to propel risk assets.
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Furthermore, beneath the surface, growing background noise—from auto loan delinquencies and a burgeoning private equity bubble to record margin levels—suggests a rising tide of medium-term risks.
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We maintain cautious optimism for the short-term rally, yet remain profoundly wary of increasing valuations in the medium term.

Key Drivers This Week

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​The Gauntlet: MAG7 Earnings & FOMC Weigh-In

This week presents a pivotal test for market direction. The earnings of five Magnificent Seven companies will either validate the current premium or expose cracks in the AI narrative that has powered much of the S&P's 2025 ascent.
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Based on Bloomberg Intelligence, Earnings growth for the Magnificent Seven is losing momentum, with Q3 2025 projected to be the smallest expansion since early 2023.

Concurrently, the FOMC meeting on Wednesday will be scrutinized for any subtle shifts in tone regarding future monetary policy.
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The S&P 500's year-to-date gain of 14.6% has been heavily influenced by these tech giants. Any weakness could trigger a significant repricing.
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Investors will be watching for signs that the Fed, despite global easing trends, remains steadfast or hints at a more dovish stance, which would further fuel the liquidity-driven rally.

Bitcoin's Relentless Ascent & Gold's Quiet Strength

While equity markets navigate earnings, Gold and Bitcoin have undeniably stolen the spotlight as top-performing assets in 2025. Gold has surged an incredible 51% YTD, while Bitcoin is up ~30%

Bitcoin, specifically, has shown remarkable resilience, trading around $113k this past weekend and earlier in October pushed above $125,000 to new all-time highs.
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This is a clear signal of capital rotation into alternative stores of value and high-conviction digital assets amidst macroeconomic uncertainty.

The continued strength of these assets, often seen as safe-havens, provides a counter-narrative to the equity-driven "goldilocks" and underscores underlying inflation and uncertainty concerns.

The Undeniable Creep of Credit Risk

Despite market optimism, the background noise around growing credit distress is becoming louder and harder to ignore.
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We're observing rising auto loan delinquencies, signs of stress in the private equity sector, and record levels of margin debt deployed.

These indicators point to potential systemic vulnerabilities being masked by current market liquidity.

While macro conditions are driving markets higher now, these underlying issues represent a critical medium-term threat that could fundamentally alter the market landscape once liquidity conditions shift or confidence wanes.

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🧭 Proflex Playbook – Stay Agile, Stay Alert

We are at a critical junction where short-term momentum clashes with building medium-term risks. Navigating this environment demands a disciplined, tactical approach.

Our stance remains clear and decisive:

• Focus on Structural Growth: Continue to overweight the secular AI theme, recognizing its multi-year runway.
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• Anticipate Shallow Corrections: Use dips as accumulation opportunities, not reasons for fear, understanding that "none of the corrections stick."
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• Diversify Thoughtfully: Recognize the "decorrelation" across asset classes; consider gold and Bitcoin for portfolio resilience.
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• Develop Mental Models: Prioritize long-term planning (6-12 months out) over short-term news, aiming for consistent, incremental gains.

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If you're an All-Access or Managed Portfolio subscriber, our positioning has already shifted ahead of this moment—scaling up asymmetric hard asset plays while hedging for earnings volatility and geopolitical tail risks.

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Until next week,

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— The Proflex Team
​ Trusted Macro Insights. Calm Investing. Tactical Trades.

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