The Bubble Burst that Never Was
The Pioneer Perspective - November, 2025
We hope you all had a wonderful Thanksgiving! We’re excited to get back into the grind after taking a couple of days off.
Word on the Street
The major events on Wall Street this month:
- Government shutdown: The longest government shutdown in US history ended on November 12. The 43-day shutdown concluded with a 60/40 Senate vote. However, the ghosts of the shutdown still remain with a permanent blackout of economic data.
- FOMC: No FOMC decision this month, but the next meeting is December 9-10. Will the Federal Reserve cut? Hold? Hike? Let’s see.
- AI Boom Softening: AI stocks have recently experienced a slowdown relative to historical precedent. Extreme valuations and grid concerns have exacerbated this fear. Could this be the beginning of a bubble burst? We’ll lay it out for you.
Major indices closed the month of November mixed, with the S&P 500 and Dow Jones squeaking out a positive month in the bottom of the 9th inning. The Nasdaq closed down from tech stocks underperforming. Our Pioneer Financial portfolio closed out the month -0.82%, with our Bitcoin and Ethereum exposure being the main culprit. We added more crypto and S&P 500 close to the bottom to drop our cost average so we are very comfortable with where we sit as of now.
What Happened?
Let’s break down the word on the street.
Government Shutdown: Why do we need an unemployment rate? Because it’s important. On November 12, the longest government shutdown in US history ended. Which political party was responsible for the shutdown lasting so long? It doesn’t matter. We try to stay apolitical over here at Pioneer Financial. Frankly, it was the fault of both sides, and now we have to deal with the consequences. Aside from the delayed/cancelled airline flights, people missing paychecks, and the general irritation of a government shutdown, we are missing some crucial data. In the current state of the economy, with so many things changing, every decimal of data matters. As of now, it appears that we will never get the unemployment rate for October, and we will likely never get the CPI data for October. These two metrics are extremely important and will have downstream effects because it means the Federal Reserve is flying with one eye closed. The primary job of the Federal Reserve is to maximize employment while keeping inflation low. With an interest rate meeting in December, how are they supposed to make an informed decision when they are missing October’s employment and inflation data and November’s data will not be published yet? As we mentioned, a lot is in motion. The unemployment rate is currently at 4.4%, yet although this number is historically low, it’s important to mention that it has been steadily increasing since the low of 3.4% in April 2023. Inflation is hovering at around 3% YoY. I know we’ve become accustomed to multiple years where inflation exceeded 5% or more, so 3% may feel relieving but it’s above the target rate by 50% (FED shoots for 2% YoY). All of this is to say that when the next round of data comes out in December it will technically be encompassing two months’ worth of numbers, so we will likely see a much more volatile swing for both CPI and unemployment. We will dive deeper into the ramifications in the Now What section.
FOMC Meeting (or lack thereof): The Federal Reserve didn’t have a meeting this month. So how does a lack of meeting warrant us giving up precious space in this newsletter? Because the meeting next month is the last one of the year and it will be missing TWO MONTHS OF DATA. We didn’t have unemployment or CPI data for October, and the November data for both of these metrics won’t be released until December 16 and 18, respectively. We just checked our calendar, aaaaannnddddd it looks to us like December 16 and 18 are AFTER the FOMC meeting. So where will we land on a rate decision? Nobody knows, but thankfully we can see where people are putting their money. Currently, Kalshi betting markets are showing a 87% chance that the FED will CUT rates by 25 basis points. Please note that the odds of a rate cut were hovering near 90% before the government shutdown, then they were effectively split 50/50, and now a rate cut has taken the lead. What this tells me is that yes, the FED will likely cut rates, but at the very least people are more unsure than they have been in months and we are seeing some strong volatility on this metric. Frankly, who can blame them when there is insufficient data to back their decision? Mark your calendars for December 9-10.
Retrieved on 11/29/2025 from https://kalshi.com/markets/kxfeddecision/fed-meeting/kxfeddecision-25dec
AI Boom Softening: Let’s switch gears a bit here and stop talking about the government. The markets ended mixed on the month and investors largely believe it is due to the AI boom finally losing some steam. Are we in a bubble? We believe so, but with some caveats. First, we should mention that anytime there is some sort of disruptive technology that hits the market it is almost always followed by speculative investment and massive overvaluation. Ford Motor company demonstrated this with the invention of the assembly line back in 1913. We saw this phenomenon again in the 1920s with the ability to trade on margin, specifically trading on only 10% down. Yes, that means that a person in 1926 could invest $1,000 with only $100 of real cash (imagine if they had apps like Robinhood back then and 0DTE options contracts, we wouldn’t have made it out alive). Anyways, if you’re reading this then you obviously know how that turned out in 1929. Finally, in modern times we saw something groundbreaking happen with both the internet (dot-com bubble) and mortgage-backed securities (2008). In all of these cases, something new hit the markets, people euphorically flooded to invest every dollar they had to get rich, and in every case it ended in a bloodbath. So, in that case yes we’d say we are clearly in a bubble. From a valuation standpoint, we just don’t see how some of these stock prices can be justified. Some companies are trading at well over 50x their forward P/E ratios.
Now, the reason we say there are caveats is that we do believe AI will change the world in ways that we can’t yet comprehend. Just like the internet began changing the world in the late 1990s, we see a similar future with AI. It doesn’t mean the system all comes crashing down, but it does mean that the system changes. For example, with the proliferation of the internet we saw a surge in companies that began selling products online. This meant that a lot of mom-and-pop shops were forced to adapt or close down. We saw Amazon, merely an online used bookstore in the beginning, become one of the largest companies in the history of the world. In the end, companies that can adapt will survive, and the ones that can’t wont. Unfortunately this means that a lot of people will get hurt along the way. We already have bubble-type valuations in the stock market along with climbing unemployment rates. Many companies are trying to adapt by incoporating AI wherever they can, the ones that don’t may not survive. AI is the future, that’s for sure. The question is whether or not that future is being fairly priced in at the present moment. And that is a question that nobody has an answer to because none of us have a crystal ball, not even Elon Musk or Jensen Hang.
Now What?
We don’t want to sound so doom and gloom about the economy, we know that if you’re reading this you are familiar with all the fear-driven headlines that you already see. Honestly, markets don’t crash when everybody is talking about a market crash. The CNN’s Fear and Greed Index has been hovering in the “extreme fear” category for the better part of the month, yet the S&P 500 only dipped 4.5% off its all-time high. These aren’t market crash conditions. The problem with bubbles is that nobody knows if or when it will pop. Theoretically, $NVDA could keep shooting straight up for years (though not likely). That said, we do see significant signs of economic slowing beneath the surface. Last month we talked about unemployment rising and showed these charts below.
Although we have had a data blackout since the shutdown, we recently got the delayed unemployment rate for September, and it did increase to 4.4%. Again, although historically low, it marks a 23% increase from just two years ago, and the rate of acceleration is increasing as well. As we already mentioned, the data that will come out in December will really be providing two months of unemployment, so we will be paying close attention. We expect unemployment to reach 4.7% by December which would be a 28% increase off the low. Continued rises of unemployment will FORCE liquidity to dry, making discretionary investing impossible. The more people lose their jobs, the more that institutional investors will try to secure their gains on these massively overvalued tickers to beat the drop. For all my bears out there, perhaps we are seeing signs of weakness, but more than likely you will have to wait a bit longer.
WE ALSO WANT TO MENTION THIS: Here is what we wrote in our last newsletter and showed the chart below.
I’d like to discuss another aspect of economic health outside of unemployment, which is bankruptcies. I like to view bankruptcies as a corporation becoming unemployed rather than a person. The amount of large corporate bankruptcies that have been filed over the last two years has been staggering, yet it receives almost no headline love. We have seen a spike in corporate bankruptcies for companies that are worth at least $100 million. We have seen roughly 125 bankruptcy filings submitted YoY as of September for corporations that meet this valuation criteria. We know what you’re thinking… “Is this a lot? Give me context.” Here’s your context, my faithful subscriber. Since the year 1990, annual bankruptcy filings for corporations with a value of $100 million or more have never exceeded 100 without a recession following.
Well… It looks like these bankruptcies are beginning to get some headline love after all. Here is just a small collage of bankruptcy related headlines from this month.
In Short
The bubble burst that people were clamoring about mid-month seems to have been a giant nothing-burger. The entire drop that the S&P 500 experienced was erased shortly thereafter and it ended up closing the month of November GREEN. However, we still believe that the economy is slowing rather significantly. The predictions that we set forth last month are continuing to bear fruit. Unemployment is rising, bankruptcies are rising, and the overvaluation of certain stocks is obviously still a factor. The question is still how long these big names can carry the weight of the entire economy. We are not going to give you some fear-driven timelines or try to pretend that we know exactly when it’s going to happen based on some fancy lines drawn on a Tradingview chart. Anybody who says they know exactly what’s going to happen and when is frankly lying to you. We won’t do that. That said, we are increasing our defensive positioning with our current portfolio being roughly 43% bonds. We will continue to slowly advance this position overtime to mitigate volatility risk and perhaps even capitalize on a market downturn. We remain 24% allocated in the S&P 500 and about 10% in crypto, split between Bitcoin and Ethereum to still rake in some risk-asset gains. Follow us on X to get regular updates on our economic outlook. Until then, good luck out there and Godspeed.
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Disclaimer:
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Opinions expressed are solely those of the author and are subject to change. Past performance is not indicative of future results. Investing involves risk, including possible loss of principal. Readers should consult a qualified financial professional before making any investment decisions. Pioneer Financial, LLC and its affiliates assume no liability for actions taken based on this material.