Government Shutdown Likely at Midnight
Data delays and agency closures raise near-term macro uncertainty.
With talks stalled on a continuing resolution, a lapse in appropriations would partially shut federal agencies and likely delay releases such as jobs, PCE, and GDP. While brief shutdowns have had limited market impact, longer standoffs can dent GDP, confidence, and risk appetite. Watch progress on a stopgap, scope of closures, and rating-agency or Fed commentary.
Expect episodic volatility; prioritize liquidity and quality until visibility improves.
Stocks Score Best September Since 2010
Strength in tech and easing hopes lift risk appetite.
The S&P 500 gained ~3.5% and the Nasdaq ~5.6% in September as AI-led tech and resilient earnings drove leadership; the Dow hit a record. Strong performance in a historically weak month may pull forward returns and heighten sensitivity to data, earnings, and policy surprises. Breadth and Q3 guidance from megacaps will be critical for durability.
Rebalance after gains and assess concentration risk in AI-led winners.
Fed Sees PCE Near 3%, Above Target
Sticky services inflation could slow the pace of easing.
The Fed projects year-over-year PCE near 3% in Q4 2025, versus the budget office’s ~2.4%; nowcasts point to 2.8–3.0% PCE and ~3.0% CPI. A higher-for-longer profile keeps front-end yields sensitive and complicates policy if data are delayed by a shutdown. Officials note a cooling labor market, but services and wage pressures remain key.
Favor a duration barbell, selective inflation hedges, and quality credit.
US-China Trade Decoupling Deepens
Tariffs and enforcement accelerate supply-chain reconfiguration.
China’s exports to the US fell ~15.5% in the first eight months of 2025, amid new US tariffs aimed at curbing rerouting via third countries. Ongoing decoupling raises costs and planning complexity for hardware, machinery, and consumer durables, while nearshoring and automation beneficiaries gain share. Watch US import data and corporate guidance for sustained country-share shifts.
Diversify Asia exposure and lean into nearshoring and logistics upgrades.
Labor Market Softens; Jobless Rate 4.3%
Cooling jobs growth heightens sensitivity to growth shocks.
August unemployment held at 4.3% with roughly 22,000 jobs added, while long-term unemployment has risen to about a quarter of the jobless. Softer labor data typically supports lower front-end yields, but sticky inflation may mute the response; some releases could be delayed if a shutdown occurs. Wage dynamics remain central to services inflation and margins.
Tilt toward balance-sheet quality and stable cash flows.
Quick Hits
- Energy layoffs as crude falls ~10.5% YTD signal cost discipline and potential capex restraint.
- Fed trims Morgan Stanley’s SCB to 4.3% from 5.1%, offering modest capital relief.
- ECB says inflation risks are contained, reinforcing a hold-for-now stance.
- BOJ split on further hikes; completes stock-purchase disposal program.
- Bitcoin little changed; a shutdown could slow US crypto rulemaking and enforcement.
This briefing is for informational purposes only and is not investment advice.
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