October 18, 2025

 

The S&P 500 rose 1.7% this week. The Bloomberg Aggregate Bond Index gained 0.5%, while Gold rose 5.4% and Bitcoin fell 8.8%. 

This week delivered three key economic reports. The University of Michigan Consumer Sentiment stayed almost flat at 55, reflecting cautious consumers amid inflation worries. The NFIB Small Business Optimism Index dipped by two points to 98.8, holding just above its historic average as owners faced rising uncertainty and persistent labor shortages. Meanwhile, the Empire State Manufacturing Index surprised on the upside, jumping to 10.7 and marking modest manufacturing growth in New York, signaling potential resilience as we enter the year’s final quarter.

 

 

 

The TACO Trade Is Back

 

 

The TACO trade—short for “Trump Always Chickens Out”—is back at center stage on Wall Street, in what’s become a familiar playbook for seasoned market participants.

The concept is simple: when President Trump threatens steep tariffs or trade confrontation (often heading into weekends), stocks wobble and volatility spikes. But just as anxieties peak, he pivots, dials back escalation, and markets rally in relief. Over the last two weeks, this script was replayed to perfection. Last Friday, Trump warned of “unsustainable” tariff hikes against China, rattling equities and sparking a sell-off. By Sunday, conciliatory signals started emerging—Trump began walking back the threat and emphasizing dialogue, which set the stage for a healthy bounce in major indexes early this week.​

Looking ahead, the planned summit between President Trump and Xi Jinping next month promises more drama. Expect headline-driven volatility as Trump postures through media leaks to extract concessions.

 

 

How The Silver Market Broke

 

 

The iShares Silver Trust (SLV) ETF, which Silverlight clients maintain a long position in, has surged 78% year-to-date. This week alone, silver prices rallied over 3%. The story in 2025 is simple: too much demand and not enough metal.

Silver is benefitting from a perfect storm of dislocations. In India, Diwali festivities sparked an unprecedented silver rush, as social media influencers like Sarthak Ahuja hyped the 100-to-1 gold-to-silver ratio, drawing millions to buy jewelry for the goddess Lakshmi. Refiner Vipin Raina, with 27 years in the business, watched in astonishment as his stocks vanished for the first time, forcing premiums to soar above $5 an ounce.

Globally, ETF investors scooped up over 100 million ounces amid U.S. dollar debasement fears, while solar power's boom and traders front-running potential tariffs drained London's silver vaults. Panic ensued: borrowing rates hit 200%, banks halted quotes, and traders screamed down phone lines—echoing the Hunt brothers' 1980 squeeze.

We expect silver to correct after the recent torrid pace of gains, but think it will eventually trade from the current price around $50 to over $80 within the next 18 months. 

 

 

Bank Credit Exposure Is A Gray Area

 

 

Regional bank stocks have come under renewed pressure lately, sparking flashbacks to the 2023 crisis triggered by Silicon Valley Bank’s collapse. The sector’s current woes center around mounting losses in commercial real estate loans, which make up a far larger portion of regional bank portfolios compared to the big banks. With property values falling and over $1 trillion of these loans coming due in a “higher-for-longer” interest rate environment, refinancing is a struggle, and delinquencies are surging—particularly among office buildings left vacant post-pandemic.​

The situation bears some resemblance to what unraveled in 2023: isolated fraud and aggressive credit risks were catalysts, and jittery markets prompted sharp stock declines. But while SVB’s downfall was fueled by massive deposit flight and exposure to underwater securities, today’s trouble is more about bad loans and credit quality at specific banks, with Zions and Western Alliance recently disclosing major write-offs.​

Going forward, investors should watch for signs that losses or liquidity strains are spreading—look for rising loan delinquencies, tighter credit standards, and sudden shifts in bank funding costs. If these red flags widen beyond a handful of banks, we will swiftly reduce risk in Silverlight client portfolios.

 

 

Sterling Infrastructure (STRL) Investment Thesis

 

 

Silverlight's Core Equity strategy is long Sterling Infrastructure (STRL). Sterling is a civil construction company poised to ride one of the most powerful structural tailwinds of this decade: the build-out of AI-driven data centers and digital infrastructure. STRL specializes in municipal and state projects for highway paving, bridge, water, sewer and light rail projects. Lately, data centers are the main factor driving record backlogs.  

Through a savvy acquisition, Sterling has broadened its capabilities across the construction value chain, placing it in more direct competition with EMCOR (EME)—one of our most successful investments in recent years. While EME delivered outstanding returns, STRL may offer even greater upside from here given its earlier stage of market penetration and direct exposure to secular growth in e-infrastructure.

Industry fundamentals are favorable. Demand for hyperscale data centers, renewable energy, and resilient civil infrastructure continues to climb, supporting Sterling’s strong backlog, expanding margins, and earnings growth potential. If the data center build-out trend endures for multiple years, STRL could evolve from a niche construction firm into a scaled industry leader. 

 

The Future Is Now

 

 

In casting news this week, Jim Carrey is reportedly in talks to play George Jetson in a live-action reboot of The Jetsons. If you think about it, the whimsical future once imagined for Orbit City is inching closer to reality.

We already live in a version of the Jetsons’ world as flying cars—once pure fantasy—are now tangible. For instance, Chinese firm EHang recently unveiled its VT35, a two-seat autonomous eVTOL (electric vertical take-off and landing) vehicle. It can cruise around 134 mph, travel up to 125 miles on one battery charge, and is priced at $913,600. In California, Alef Aeronautics is also conducting tests of its Model A flying car, which can switch between road and flight mode. Early units carry a cost of about $300,000.

One thing that makes it hard to appreciate progress is hedonic adaptation. This is the tendency for humans to quickly adjust to positive changes—such as groundbreaking technological advancements—and return to a baseline level of satisfaction or wonder, effectively taking those innovations for granted. For instance, smartphones, instant global communication, and AI assistants were once the stuff of science fiction, but as we adapt, they become mundane, and we forget how radically they've transformed daily life. A related concept is shifting baseline syndrome, where each generation accepts the current state as "normal" without fully recognizing cumulative progress from the past, leading to a distorted perception of how far we've come. 

We live in an exciting time. Technology isn't just going to create more AI slop. We're on the verge of flying cars. Flying... freaking... cars! 

 

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This material is not intended to be relied upon as a forecast, research or investment advice. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and non-proprietary sources deemed by Silverlight Asset Management LLC to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Silverlight Asset Management LLC, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any of these views will come to pass. Reliance upon information in this post is at the sole discretion of the reader.​​