Internal Monologue of a Portfolio at 3:47 AM

Internal Monologue of a Portfolio at 3:47 AM

I should be sleeping. The S&P closed Friday at 6,643.70, up 0.59%, snapping three days of losses like it was shaking off a bad dream. The Dow climbed 299 points. The Nasdaq added 0.44%. Everything green. Everything fine. Everything absolutely screaming that we're still in a world where stocks only go up if you squint hard enough and pretend valuations don't exist.

But here's the thing keeping me awake: I can't figure out what any of this means anymore.

Energy's up over 6% for the quarter. Six percent. The sector everyone left for dead is suddenly having a pulse, climbing 3% this week alone while oil sits at $65.26 per barrel—down 4.26% year-over-year but somehow still managing to make energy equities look alive. The EIA's projecting Brent will crater to $59 in Q4 and hit $50 by early 2026, which should be a death sentence for the sector, but apparently we're pricing in miracles now. Or maybe just desperation. Hard to tell the difference these days.

Meanwhile, China's industrial output and consumption posted their worst numbers of 2025 in August. Household consumption contributed just 29% to Q3 2024 GDP—down from 47% in Q2 and 59% pre-pandemic—and Beijing's response has been to roll out what Bloomberg's calling a "mini stimulus" because they've run out of room for the real thing. Debt's piled too high. Options are narrowing. The whole rebalancing act everyone's been waiting for? Still waiting. They're trying to juice services, tourism, health care, education, sports—anything to get domestic demand moving—but it's like trying to restart a flooded engine by turning the key harder.

And yet the S&P's down less than 1% for the week after briefly touching those lows Thursday morning when Treasury yields spiked after jobless claims data. Futures dropped to 6,653.50 before everyone collectively decided that bad news is still good news if it means the Fed cuts more. Swap traders are pricing in 40 basis points of cuts before year-end. Forty basis points. As if that's the magic number that makes everything work again.

You know what nobody's talking about? The fact that we're holding these levels purely on vibes and the assumption that someone, somewhere, has this under control. China's growth is sputtering. Oil demand growth in 2025 is forecast at 740 kb/d—the lowest since 2009 outside of the Covid year—because emerging market consumption is "particularly lacklustre." That's IEA-speak for "nobody's buying because nobody has money." And yet equities shrugged it all off Friday with a rally that felt less like conviction and more like exhaustion.

The dollar fell. Bond market response was muted. Energy popped. And I'm supposed to believe this is sustainable?

Here's the truth I keep circling back to at 3:47 AM: we're in a market that's stopped pricing anything real. It's all reflexive now—stocks hold because they held yesterday, bonds price in cuts because cuts are the only move left, commodities bounce on technical levels that don't mean anything except that algorithms decided they do. China's slowdown should matter. Oil's structural weakness should matter. The fact that household consumption in the world's second-largest economy is collapsing should definitely matter.

But it doesn't. Not yet. Not while the S&P can bounce 0.59% on a Friday and everyone goes home feeling like they dodged another bullet.

I should be sleeping. Instead, I'm watching crude tick down another 0.69% overnight, wondering when the market runs out of reasons to ignore what's actually happening. Energy's having its moment because it's the only thing that moved. China's trying to stimulate without rebalancing because they can't afford the real thing. And stocks are trading near all-time highs because the alternative—admitting we're pricing in fantasies—is too uncomfortable to consider on a Friday afternoon.

Forty basis points. That's what's holding this together. Forty basis points and the collective agreement not to ask what happens when the cuts come and nothing changes. When oil's at $50 and China's stimulus doesn't work and the labor market cools past "resilient" into something uglier.

I should be sleeping. But I keep thinking about energy up 6% for the quarter while oil slides toward $50. About China's worst consumption print in years getting a mini-stimulus bandaid. About swap traders pricing in salvation like it's a guaranteed delivery.

And I wonder: when did we all agree to stop pretending markets price risk? When did we decide that holding 6,600 on the S&P is more important than asking why we're holding it?

The answer, I think, is that we never decided. We just kept going. Kept buying. Kept assuming someone else had done the math. And now we're here, at 3:47 AM, watching futures drift and wondering if Friday's rally was real or just another reflex in a market that's forgotten how to do anything else.

I should be sleeping.

But so should this market.