Summary
Phil Anderson argues that the real estate cycle’s upswing remains intact, supported by a third consecutive Fed rate cut, a resumption of Treasury purchases ($40B/month), and the One Big Beautiful Bill fiscal stimulus signed into law on July 4th. While AI-related stocks show weakness, broad market breadth indicators — transport ETFs at record highs, small-caps breaking out, bank ETFs rallying, and 52-week highs hitting their highest level of the year on December 11 — confirm the cycle still has room to run before its expected peak sometime in the coming year.
Key Claims
- The Federal Reserve cut rates by 0.25% for the third consecutive time since resuming cuts in September — confidence: high
- The Fed is resuming purchases of Treasury securities at $40B/month, ending its quantitative tightening program — confidence: high
- Chicago Fed financial conditions are already running loose (below the zero average line) and Fed actions will loosen them further — confidence: high
- The One Big Beautiful Bill was signed into law on July 4th by President Trump — confidence: high
- The CBO forecasts the bill will boost real GDP by 0.9% in the following year — confidence: high
- The bill is also forecast to add trillions to the deficit and push debt levels higher, making U.S. dollar performance a critical monitoring variable — confidence: high
- AI bellwether stocks (NVDA, MSFT, ORCL) are showing weak price action and lagging the broader market — confidence: high
- The iShares US Transportation ETF (IYT) broke out to record highs as of the email date — confidence: high
- The NYSE advance/decline line and new 52-week highs are making new highs ahead of the S&P 500 — confidence: high
- Daily new 52-week highs across all U.S. exchanges hit their highest level of the year on December 11, 2025 — confidence: high
- The top 10 S&P 500 holdings account for over 40% of the index, a record concentration — confidence: high
- Small-cap and bank ETFs in the U.S. are also rallying to record highs — confidence: high
- The real estate cycle peak is still expected to arrive sometime in the coming year (2026) — confidence: medium
Mex Pete References
- Rio Tinto (RIO) is held in the Mexican Pete model portfolio. Phil raises the stop-loss on RIO to $135, described as the breakout level to record highs. Notes the stock has already successfully retested that level once; a second test would signal potential breakdown and grounds to exit. No ascending triangle pattern explicitly described in this email.
Stock Picks / Signals
- Rio Tinto (RIO) — Hold; stop-loss raised to $135 (breakout level to record highs); action: adjustment to existing position in Mex Pete Model Portfolio
- iShares US Transportation ETF (IYT) — Bullish signal; cited as breaking out to record highs; no explicit entry signal given, used as a market confirmation indicator
- Nvidia (NVDA) — Bearish/cautionary note; off prior peak (set end of October), hovering near three-month lows; no trade signal issued
- Microsoft (MSFT) — Bearish/cautionary note; weak price action cited; no trade signal issued
- Oracle (ORCL) — Bearish/cautionary note; weak price action cited; no trade signal issued
Predictions / Forecasts
- Real estate cycle peak expected to arrive sometime in 2026 (Phil’s standing forecast; no specific month pinpointed)
- Fed easing and fiscal stimulus expected to provide economic tailwinds in the second half (of the cycle upswing / coming year)
- U.S. dollar performance flagged as a critical variable to monitor given deficit expansion from the One Big Beautiful Bill
Notable Quotes
“The real estate cycle always finds a way to complete itself. The construction and economic boom need fuel in the form of credit and liquidity to do so.”
“Instead of guessing, we’ll continue watching for clues from market sectors sensitive to economic activity.”