The Year We Learned Capitalism Still Works (And Still Hurts)

It's December 17th, and for the first time since November, I'm thinking about 2025 as a complete story rather than an ongoing scroll of headlines. That might seem odd given that equity futures are flat, Bitcoin is bruised at $86,400, and the S&P 500 just breached its 50-day moving average for the third straight losing session. But there's something clarifying about a wobble in a bull market. It forces you to ask what the bull market was ever really about.

Medline went public yesterday at 9:30 a.m. ET. The company is a $250+ billion medical supplies apparatus—ventilators, syringes, bandages, the invisible infrastructure of American healthcare. The IPO was priced at $29. It opened at $35. It finished the day at more than $35.50. The market was willing to pay a 22% premium to own a boring company with predictable revenue and no artificial intelligence footnotes. That tells you something.

It tells you that capital still recognizes the difference between a thing and a bet on a thing. Medline is a thing. Oracle, by contrast, has spent the last month asking investors to bet on a future where data center capital is endlessly fundable at the spread levels Oracle wants. When Blue Owl said no on Tuesday—walking away from a $10 billion Michigan project—the market did what markets do. It repriced. Oracle down 5.4%. Nvidia down 3.8%. The Nasdaq down 1.9%. The fundamental question got asked aloud: what if the growth rate can't sustain the balance sheet you've built to capture it?

Micron reported after the close. The company beat estimates, raised guidance to $18.7 billion for the quarter (versus $14.2 billion consensus), and its stock popped 7% in after-hours trading. In a landscape where every other chipmaker is getting hammered, Micron's pop feels almost defiant. But it shouldn't. Micron is profitable. Not forward-looking profitable, not theoretically profitable—actually profitable right now, on actual shipped products to actual customers. In a market starved for that signal, Micron looks like gold.

This is where the year 2025 starts to make sense. The first ten months were a narrative of "what if." What if AI capex translates to earnings? What if every business can be transformed into an AI narrative? What if rates stay lower for longer? What if the tech sector can expand margins indefinitely? The S&P 500 rose 19% on those questions. The Nasdaq 100 rose alongside it, dragging indices higher on the back of seven mega-cap names that captured the entire upside.

Then came November. The Fed didn't signal a rate-cut cadence that justified infinite capital deployment. China stepped in with actual stimulus, which spooked the "growth at any price" crowd. And suddenly, the market started asking "what if we're wrong?" The sell-off wasn't catastrophic—the major indices are still solidly in the black for 2025—but it's been steady, persistent, and most importantly, it's been selective. Flight from the frothy, flight toward the concrete.

Here's the thing about capitalism: it kills whatever it built once the returns look wrong. Oracle isn't dying because data centers are bad. It's dying because it borrowed aggressively to build them, and the debt maturity schedule is becoming a constraint on future builds. That's not a technology problem. That's a capital discipline problem. And capital markets, for all their flaws, eventually enforce discipline.

Christopher Waller told CNBC on Wednesday that he saw room for rate cuts. The Fed Governor isn't a dove—far from it—but he's reading the same signals everyone else is. Job growth is softening. Consumer spending is showing cracks (retail sales came in flat in October when expectations called for a 0.1% gain). And the inflation backdrop, while still sticky, is no longer accelerating. The market is pricing in an 80% probability that the Fed holds steady in January, but the conversation has shifted from "will they cut?" to "when will they have to?"

That shift matters for the narrative we tell ourselves about 2025. For most of the year, capital lived in a world where growth was the only story, and growth was always available if you could just borrow a little more. Now capital is living in a world where growth is constrained by leverage, where balance sheets matter again, where a 22% pop for a medical supplies company can move sentiment more than another quarter of Nvidia guidance uncertainty.

Crypto is down, but not catastrophically. Bitcoin is off about 30% from its October high of $126,000, sitting near $86,400 as of this morning. The crypto market has turned into a barometer of risk appetite. When equities sold off, crypto followed. When oil jumped 2.7% on Wednesday (Trump announced a Venezuela blockade, geopolitical risk returned), crypto didn't get the risk-on boost it might have gotten six months ago. It stayed pinned. The market is in a regime where all risk assets feel correlated downward, and the only thing moving up is the stuff you can own and touch: energy, commodities, and Medline syringes.

CPI comes tomorrow at 8:30 a.m. ET. The consensus is 3.1% headline inflation. If it beats expectations, expect a technical rally in duration-heavy names. If it prints hot, expect more pain for anyone who's been positioned for "soft landing, gradual normalization." But either way, the real story isn't the number itself. The real story is that after a year of ignoring inflation data in favor of AI narratives, markets are suddenly looking at inflation data again.

There's a historical parallel here. In the 1960s, capital markets became convinced that the Bretton Woods system was permanent. Interest rates could stay low indefinitely. Currencies could be fixed. The fundamental constraints on capital—money itself—didn't apply to a superpower. It took a decade and a geopolitical shock to prove otherwise. The system collapsed in 1971, and capital had to relearn the meaning of scarcity.

We're not there yet. But we're in the moment where capital is relearning that balance sheets matter, that leverage eventually bites, and that boring companies with predictable cash flows and real earnings are not contemptible—they're rational. 2025 wasn't a crash. It was an education.

The S&P 500 is still up 5.7% year-to-date. The Dow is up 12.95%. The narrative that capital is being destroyed is overstated. What's happening instead is that capital is being redistributed from concepts to cashflows, from the indefinitely leveraged to the conservatively financed, from narrative to numbers.

That's not a bear market. It's just capitalism doing its job. And after a year where it seemed like the job was to validate every thesis regardless of economics, it's almost refreshing to watch it remember what rules are.