U.S. Economic Outlook Q4 2025
This AI-generated Q4-2025 analysis draws exclusively from data sourced from X.
The combined picture is a two-track economy that is getting cleaner on inflation prints while getting dirtier on household and small-business solvency. One track is asset markets and AI-led capital spending. The other is cash-flow reality for consumers, small firms, and lower-quality credit.
Inflation is clearly cooling in the reported aggregates, with November CPI and core CPI both coming in well below expectations in what was described as the biggest inflation drop since March 2025 (see The Kobeissi Letter). A separate rent-focused post points to the sharpest drop in rents in 15 years (see zerohedge), which helps explain why the inflation numbers can improve quickly. Energy is also helping: oil falling below $57 per barrel (see The Kobeissi Letter) is consistent with near-term disinflation pressure.
The contradiction is that “inflation down” is not translating into “life feels cheaper.” Necessities affordability remains structurally worse than wages. Since January 2021, food away from home, shelter, and other basics have risen materially faster than wages, with shelter also up sharply over the last decade (see The Kobeissi Letter). Grocery inflation remains elevated in the lived experience, with one post citing 5.3% year-over-year grocery inflation as of July 2025 and rural areas experiencing even higher increases (see The Kobeissi Letter). Auto insurance is another quiet tax that has not normalized, with premiums up roughly 55% since 2020 and more people skipping coverage (see Car Dealership Guy). This helps reconcile how headline CPI can fall while households still report strain.
Household balance sheets and credit performance show that strain turning into defaults. Delinquencies are rising across auto, credit cards, mortgages, and especially student loans, with serious student-loan delinquency described as hitting an all-time high after relief expired (see The Kobeissi Letter). Vehicle repossessions are reported at the highest level since 2009, with over 1.7 million cars seized last year (see First Squawk), and car payments over $1,000 per month are now common enough to be described as “more than one in five borrowers” (see unusual_whales). Credit is also getting harder to access at precisely the wrong moment: rejection rates across major credit types are reported at an all-time high (see unusual_whales). Put those together and you get a classic squeeze: higher required payments, less ability to refinance, and less ability to roll debt forward.
The labor market story is internally consistent with that squeeze, but it conflicts with parts of the corporate narrative. Hiring plans are reported as the weakest since 2010 and down sharply from 2024, with seasonal hiring intentions hitting record lows (see The Kobeissi Letter). Job cuts are reported near post-2009 extremes, with October described as the worst October in 22 years and layoffs driven more by cost-cutting and market conditions than by AI (see The Kobeissi Letter). Manufacturing employment is described as plummeting, with the ISM manufacturing employment index in sustained contraction (see The Kobeissi Letter). Small business employment looks especially weak, with November cuts described as the largest since May 2020 and a multi-month downtrend (see The Kobeissi Letter). At the same time, corporate sentiment in earnings calls is described as unusually optimistic (see The Kobeissi Letter). One way to reconcile this contradiction is to treat earnings-call tone as reflecting the asset-market and AI track, while hiring and job cuts reflect the broad operating economy where margins are being protected by reducing headcount.
Consumer behavior gives another contradiction that becomes meaningful when you stack the posts together: sentiment is near record lows while spending still posts record moments. Consumer sentiment readings are described as among the worst on record, including one claim of the second-lowest ever (see Global Markets Investor) and a separate note about an unprecedented disconnect between depressed sentiment and still-positive retail sales growth (see Charlie Bilello). Meanwhile, online Black Friday spending hit a record (see The Kobeissi Letter). The synthesis here is not “the consumer is fine.” It is that spending is becoming more bifurcated and more financial-engineered: some households are still spending, others are downshifting hard. Restaurant data supports that downshift: negative same-store sales are widespread, operators are flooding the zone with promotions, and diners are changing behavior to spend less (see Kat Bites). The unusual part is that “spending” can remain nominally strong even while demand quality weakens and defaults rise.
Housing and real estate are where disinflation and stress coexist most clearly. Rents decelerating helps CPI (see zerohedge), and new-home prices are reported as falling sharply, even below 2019 levels for at least one major builder series (see Darth Powell). Yet transactions remain frozen. Pending sales are described as the lowest in 30-plus years and worse than the GFC, with buyers fundamentally disinterested due to affordability and the rent-versus-buy gap (see Nick Gerli). Builders are sitting on near-record inventories of permitted-but-not-started and listed-but-not-started homes (see Nick Gerli), which suggests the supply side is cautious despite the need for housing. Commercial real estate adds a separate stress channel: office CMBS delinquency is reported at a record 11.7% (see Barchart). The combined insight is that “disinflation” in shelter can arrive through a transaction freeze and price incentives rather than through a healthy affordability recovery.
Markets are signaling abundance and fragility at the same time. Equity indices are pushing to records and are framed as exceptionally strong (see The Kobeissi Letter), and the Nasdaq 100’s historical momentum setup is presented as bullish based on limited prior instances (see The Kobeissi Letter). But classic late-cycle risk markers are flashing: the S&P 500 dividend yield is back to dot-com era lows (see Charlie Bilello) and margin debt is at record highs (see StockMarket.News). Breadth concerns are reinforced by commentary that the market is being dragged up by a narrow set of AI-linked companies while most sectors lag (see Uncle Milty’s Ghost). The unique insight when you combine these with the bankruptcy and credit posts is that the economy can be “up” in index terms while becoming less resilient underneath. In that world, small shocks can matter more, because leverage and concentration reduce the system’s ability to absorb disappointment.
The “AI track” is not just a stock story. Multiple posts frame real GDP growth as unusually dependent on tech and AI capex, with one citing nearly 40% of growth driven by tech capex and warning that the contribution cannot persist without realized profits (see thexcapitalist). Another argues that data-center investment is up more than 300% while other nonresidential structures stagnate, and implies the economy would be near recession without AI spending (see The Kobeissi Letter). Global M&A strength is also tied to AI as a driver (see The Kobeissi Letter). The contradiction is that while AI spending and deal activity look like expansion, the riskiest corporate loans are deteriorating and distressed loan volume is rising (see The Kobeissi Letter). That combination suggests a barbell corporate economy: well-capitalized winners consolidating and investing, while weaker credits slide toward distress.
Fiscal and funding dynamics amplify the fragility. The deficit is described as record-worst for an opening fiscal month, with spending running extremely high (see The Kobeissi Letter). Public debt is described as hitting a record $37.9 trillion with a rapid monthly increase (see The Kobeissi Letter). Treasury issuance is described as increasingly concentrated in T-bills, making interest costs more sensitive to the policy rate (see The Kobeissi Letter). This is the macro backdrop for why “rate cuts” may not feel like relief to consumers: the system is carrying more rollover risk and more rate sensitivity.
Liquidity signals and credit signals are also pointing in different directions, and that contradiction is worth highlighting. A long post frames a sharp SOFR decline as a liquidity flood and a warning sign for systemic stress and future bubbles (see shanaka86). At the same time, households face record credit rejections and rising delinquencies (see unusual_whales and The Kobeissi Letter). The combined insight is that liquidity can be abundant at the top of the system while access to credit tightens at the edge. That is how asset markets can inflate even as Main Street weakens.
International positioning is another area where stacking the posts produces a clearer picture. Foreign private investors are reported to be buying U.S. equities at a record pace and also buying Treasuries heavily (see The Kobeissi Letter). The dollar’s share of global payments is reported near a 13-year high, contradicting popular de-dollarization narratives (see Barchart). Yet the real trade-weighted dollar is described as extremely overvalued even as the nominal DXY is down on the year (see The Kobeissi Letter). The synthesis is that U.S. assets remain the global magnet, but the relative price of the dollar and U.S. financial assets is part of the risk, not just a sign of strength.
Finally, bankruptcy data ties the threads together. Large bankruptcies are reported as the highest in 15 years (see First Squawk and The Kobeissi Letter), while one post notes even six-figure earners adopting extreme coping behaviors like side hustles, selling items, skipping meals, or exploring consolidation or bankruptcy (see unusual_whales). That is not a normal “soft landing” household narrative. It is consistent with a slowdown already underway for a large share of the population, even if headline GDP is being held up by concentrated investment and government outlays, a tension also suggested by the claim that a large majority of the population lives in regions experiencing recession (see The Kobeissi Letter).
Baseline outlook: the most defensible read from this combined set is disinflation with rising recession risk, paired with unusually elevated financial-market risk due to leverage, concentration, and dependence on AI-led capex. The primary contradiction is “cooling inflation and record asset prices” versus “worsening credit performance, bankruptcies, and small-business job cuts.” The unique insight is that these are not competing stories; they are the same story seen from two levels of the system.
Guidance for Households
In this environment, the highest-value move is to reduce fragility. Prioritize paying down high-rate revolving debt and stabilizing monthly obligations before chasing returns, because delinquency trends and credit rejections imply refinancing may not be available when you want it (see The Kobeissi Letter and unusual_whales). Build a larger cash buffer than you would in a normal year, because hiring intentions and job-cut announcements point to weakening labor conditions, especially outside the AI winners (see The Kobeissi Letter and The Kobeissi Letter). Treat big new fixed payments with suspicion. Auto affordability looks especially risky given $1,000-plus monthly payments and repossession data (see unusual_whales and First Squawk). For housing, separate “prices are falling in places” from “affordability is fixed.” Transaction data implies the market can stay frozen longer than expected even if headline inflation cools (see Nick Gerli). On investments, recognize the contradiction: markets may keep rising on momentum and liquidity, but valuations, leverage, and breadth concerns raise the cost of being forced to sell at the wrong time (see StockMarket.News and Uncle Milty’s Ghost). The practical household version is simple: keep risk you can hold, avoid risk that can margin-call you.
Guidance for Small Businesses
Assume demand becomes more price-sensitive and more promotion-driven, and plan accordingly. The restaurant data is a clean illustration of what “strained consumer” looks like in practice: traffic softness, aggressive discounting, and customers trading down (see Kat Bites). Protect liquidity and keep financing optionality, because credit availability is tightening even as top-of-system liquidity can look abundant (see unusual_whales and shanaka86). Be cautious about expanding fixed payroll, because small-business employment is already contracting meaningfully (see The Kobeissi Letter). If you rely on construction, freight, or industrial-linked demand, treat the heavy-truck collapse as a warning flag for downstream work (see The Kobeissi Letter). If you are exposed to commercial real estate, office-credit stress is now a first-order risk (see Barchart). Finally, if you invest in AI or automation, do it the way the macro is demanding: projects that pay back quickly, reduce real costs, or increase throughput, not projects that require perpetual growth assumptions to justify the spend. The GDP and capex posts are a reminder that the economy is leaning on AI investment, which can be an opportunity, but it also means the “AI track” is where expectations are highest and disappointment risk is real (see thexcapitalist and The Kobeissi Letter).