Content Strategist, Dunham | 2025 ThinkAdvisor Luminaries Award Winner | 2026 Wealthies Finalist, Thought Leader of the Year | Macroeconomics, markets, geopolitics & global trends
In This Week’s Edition
Washington’s fiscal year starts with a $404 billion deficit.
The Fear & Greed Index climbs out of extreme fear. Are investors ready to speed up again?
China’s factory prices are rising. What could that mean for global inflation?
On my bookshelf: Destined for War by Graham Allison.
Author Note
Well, that was a week.
Washington started the fiscal year deep in the red. Fear is still hanging over Wall Street like a dark cloud, while Nvidia’s leadership drama has the makings of a spy thriller. And Chinese producer inflation keeps climbing.
I’ve also got a book recommendation on rising powers, worried rivals, and why history may have a few things to say about the U.S. and China tension.
So, grab your coffee. Let’s get into this week’s Double Shot.
Adem Tumerkan Editor
Washington’s Fiscal Year Is Off to a Rough Start
The U.S. government closed fiscal 2026 with a roughly $2 trillion deficit.
And judging by October, fiscal 2027 isn’t off to a great start either.
In fact, it looks like all hell broke loose.
To highlight this, in the first month of the new fiscal year (October), Washington collected $369 billion and spent $773 billion. That left a deficit of roughly $404 billion - and about $120 billion more than in October 20251.
Put another way, the government spent just over $2 for every $1 it brought in.
Receipts fell nearly 9% from a year earlier, while spending rose more than 12% (yikes). Income tax collections and customs duties declined, while defense, Medicare, and interest costs contributed to higher spending.
Now, one month doesn’t tell us how the full fiscal year will play out. Government receipts and spending can swing around depending on payment dates, tax deadlines, and refunds.
But what caught my eye was what’s happening to receipts over a longer period. . .
As my chart below shows, year-over-yeargrowth in trailing 12-month federal receipts has collapsed to roughly 1% through October2.
That’s because federal receipts are tied to wages, business profits, investment gains, etc. So when those grow more slowly, tax collections can suffer as well.
And looking at the chart, receipts growth weakened around several past recessions (or near recessions) – especially so during the periods surrounding the 2001 and 2007–2009 downturns.
Now, I wouldn’t use this chart alone to call a looming recession. But it’s worth watching.
If receipts continue to slow while spending keeps rising, Washington could face an even wider fiscal gap. And if that weakness starts showing up in hiring, profits, and consumer spending too, the tax man may be telling us something about the economy.
Is Wall Street’s Extreme Fear Dissipating? It looks Like It (For Now)
After a brutal stretch the last month - fear on Wall Street has eased.
The CNN Fear & Greed Index recently climbed from 24, an “extreme fear” reading a week earlier, to 38, which still falls in “fear” territory - according to the snapshot3 I’m looking at.
In other words, investors appear less anxious than they were. But they aren’t exactly in good spirits.
And that’s for good reason.
Inflation remains a big concern. The war with Iran and the wider Middle East is uncertain. And the AI trade has its own questions about spending, returns, and now, leadership.
Just look at Nvidia.
Jensen Huang resigned as CEO this week following reports about his affairs - including one with a businesswoman whom U.S. intelligence officials suspect of being a Chinese spy. China has denied the allegation, and the claims remain contested. But it was enough to create turmoil.
For a company at the center of the AI boom, that’s a lot of uncertainty for investors to digest.
But here’s how I think about sentiment - it’s a bit like traffic.
Imagine drivers speeding down a highway. Then someone taps the brakes. The car behind brakes harder, the next one harder still, and before long everyone is crawling - even if the original problem has passed.
Markets can behave similarly. One piece of bad news causes investors to pull back. Falling prices make others nervous, so they sell too. Soon, fear itself can become part of the traffic jam.
Eventually, the road may clear. Drivers leave more space, ease off the brakes, and begin moving again.
But that doesn’t mean the road is safe going forward.
The Fear & Greed Index measures market behavior and sentiment – thus it doesn’t tell us whether the risks are gone or where stocks go next.
Still, the move from extreme fear to fear tells us investors are at least less defensive than they were a week ago.
Now we’ll see whether that traffic keeps moving or hits the brakes.
Is China About to Start Exporting Inflation?
For years, China’s current account surplus has exploded as exports boomed while imports lagged.
And while this has been a drag on global growth (China consuming less on a net basis), it did come with some positives.
Its vast factories, large workforce, and manufacturing networks made it a major supplier of lower-cost goods to the rest of the world.
Meaning they were exporting deflation abroad – which helped keep prices somewhat cooler.
But what happens if the world’s factory starts facing higher costs of its own?
China’s producer price index (PPI) - a measure of prices charged by industrial producers - rose 5.7% year over year in October, up from 5.0% in September.
That’s the highest since 2022 and continues a worrying trend that has persisted since mid-2025, when producer prices fell by more than 3% YoY.
The heat is also showing up in what factories pay for inputs.
Chinese factories are also paying more for the materials and energy they need. For instance, those input prices rose 7.9% from a year earlier in October5 - thus putting more pressure on manufacturers’ costs.
The point is, if manufacturers pay more for energy and materials, they can absorb those costs and accept lower margins. Or they can try to pass them on to customers.
And if enough of those costs make their way through supply chains, imported goods could eventually become more expensive for buyers elsewhere - including in the U.S.
But there’s a positive spin here.
The rise in October’s PPI was heavily concentrated in mining and production materials. Prices for industrial consumer goods were actually down slightly from a year earlier.
Still, this is a development I’m watching.
If China’s factories have less room to keep prices down, one source of disinflation the global economy has depended on for years could become, well, less dependable.
And for central banks still trying to keep inflation under control, that may be one more complicated variable they don’t need.
In Case You Missed It
U.S. inflation is proving stubborn. Consumer prices rose 0.4% in October, following a 0.6% increase in September6. Core prices, which exclude food and energy, rose 0.3%. Inflation slowed from the prior month, but the report offered little reassurance that price pressures are fading quickly. That could make the Federal Reserve’s next rate decision more difficult.
China’s export machine is still running hot. Exports jumped 35.2% year over year in October, boosted by demand for technology products, and China’s trade surplus topped a staggering $1 trillion for the year through October7. Strong overseas sales are helping support growth, but a widening surplus could also add to trade tensions with other countries (as I’ve argued before8).
Britain’s economy picked up speed. U.K. GDP grew 0.7% in the third quarter, up from 0.5% in the second9. Activity related to AI and cloud computing helped support growth. It’s a reminder that AI spending is showing up in the broader economy - even as investors debate when the investments will pay off.
Oil prices remain stuck between hopes for peace and fears of disruption. Brent crude was trading near $95 a barrel early Friday, with prices on track for a second weekly decline. But attacks on shipping (which spiked in October10) and uncertainty surrounding Iran have kept traders on edge. For now, volatility ensues.
On My Bookshelf
I recently started reading Destined for War: Can America and China Escape Thucydides’s Trap? by Graham Allison.
The premise is this - when a rising power grows strong enough to challenge an established one, both can begin to see the other as a threat - even if neither initially wants a war.
Allison takes the idea back to ancient Greece and the Peloponnesian War, when the rise of Athens alarmed Sparta. He then applies it to later rivalries - like the years before World War I.
What I find especially interesting is the role of pride and fear.
A rising nation may feel it has earned greater influence and respect. But an established power may see that same demand as a threat to its security and position.
For example, take Germany before World War I. Its industrial and economic power had grown rapidly, and its leaders wanted a larger place on the world stage. But German ambitions – specifically the build up of its navy - also raised fears in Britain and added to tensions with other European powers like Russia and France.
If there’s one sentence to summarize the main theme, I believe it’s that a nation may believe it has peaceful intentions, while its rivals focus on what it has the capacity to do.
And because intentions can change faster than armies, fleets, or industrial/economic capacity, fear can build even when leaders insist they want peace.
Sound familiar?
Allison uses that lens to examine the relationship between a rising China and an established United States. It doesn’t mean conflict is inevitable. But it helps explain how competition, mistrust, and smaller disputes can spiral into something more dangerous when both sides fear what the other might do.
I’d recommend it to anyone interested in geopolitics, history, or what is driving the global economy.
Sources
CNBC — U.S. Budget Deficit, October 2025 Comparison [cnbc.com]
FRED (St. Louis Fed) — Monthly Treasury Statement: Total Receipts [fred.stlouisfed.org]
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