WEEKLY MARKET SUMMARY
Global Equities: US equities bounced back and with a positive weekly performance on improved market breadth, driving both the S&P 500 and Dow Jones Industrial Average to a 1.1% gain that marked a new all-time high for both indices. The Nasdaq Composite outperformed slightly, ending the week 1.3% higher. US small caps gained on higher October rate cut odds, gaining 1.9% during the weekly session. Global stocks were relative outperformers, with developed market foreign equities gaining 2.6% and emerging markets up 2.9%.
Fixed Income: Bond yields edged lower in anticipation of rate cuts, bringing the 10-Year Treasury yield down to 4.12%. Demand has remained strong for corporate and municipal bonds during the week, with weekly issuance totaling $54 billion and $16 billion, respectively.
Commodities: US West Texas Intermediate (WTI) crude oil prices slumped on news of an OPEC+ production increase, falling to $60.70 a barrel. Gold continued its impressive bull run, reaching new all-time highs of nearly $3,900 per ounce. The US government shutdown, uncontrollable government spending, and general political dysfunction have led to a dramatic decline in the value of the US dollar, while increasing the safe haven appeal of gold.
WEEKLY ECONOMIC SUMMARY
Government Shuts Down: The market was surprisingly dismissive of the government shutdown, which has economists and the Fed flying blind on economic data. Republicans are seeking a “clean” continuing resolution to fund government services, while Democrats are seeking to leverage the shutdown to extend Affordable Care Act tax credits and reverse Medicaid cuts. While Republicans require 60 votes to overcome the filibuster, which would mean flipping some Democrats to their side, they could also end the standoff with the “nuclear option” of changing the rules to pass the continuing resolution with a simple majority. While uncommon, the “nuclear option” is far from unprecedented. In fact, Republicans utilized this strategy on September 11th to confirm 48 political appointees simultaneously by a simple majority vote.
Substitute Jobs Data: The government shutdown caused the release of economic data to be halted, including the September jobs report. The monthly jobs report is a crucial data release for investors and for Fed policymakers, and of particular importance in the current environment where inflation is trending higher and employment has been weaker. In the absence of the actual data release, investors had to substitute the ADP National Employment Report, which showed a monthly loss of 32,000 jobs in September.
Trade War Update: The Trump administration continued to impose targeted tariffs as negotiations with trading partners continue. The biggest story was the 100% duty on foreign-made patented pharmaceutical products, which can be avoided if the company builds a US-based manufacturing plant. A 25% tariff on kitchen cabinets, set to increase to 50% in 2026, and a 25% charge on upholstered furniture were also announced. China has hit back in the trade war by completely halting its purchases of US soybeans, prompting President Trump to propose a bailout for US farmers. Typically, the US exports roughly $25 billion in soybeans annually, with over half of that going to China, but that number has fallen to zero since the start of the tariffs with zero purchases ordered for the remainder of the year.
CHART OF THE WEEK
The Chart of the Week shows the duration of prior government shutdowns under Democratic and Republican presidencies. The US government officially shut down on October 1st, resulting in over 800,000 government employees being furloughed and potentially losing their jobs. The duration of the typical shutdown was less than a week and the longest-ever shutdown occurred in President Trump’s first term at an economic cost of $5 billion.
