01.10.25 - Shutdown is real
The US government has officially entered its first shutdown in nearly seven years — and the third during Donald Trump’s presidency. Democrats and Republicans have shown no signs of resolving their deadlock.
Roughly 750,000 federal workers are at risk of furlough, including employees at the Bureau of Labor Statistics. That means September’s crucial jobs report, scheduled for release this Friday, will likely not be published.
Markets: remain calm and shrugging of the event
US equity Futures slightly negative
US Bond yields saw only a brief jump and trading lower now
US dollar lost and now on the rise
Gold new highs almost touching USD 3’900/oz
Crypto prices higher based on the event news
My View: Another government shutdown is hardly unprecedented, markets have learned to treat these events as temporary disruptions rather than existential risks. The last major shutdown in late 2018 stretched for 35 days, the longest in US history. That episode ultimately produced only modest lasting economic damage
The true impact lies not in the shutdown itself but in the data blackout it creates. With the Bureau of Labor Statistics furloughed, the September jobs report may not be available. This leaves the Federal Reserve “flying blind” at a critical juncture, where inflation risks and labor market weakness are pulling in opposite directions.
For now, investors are ignoring the noise, riding the ongoing AI-driven momentum trade. But this complacency could be tested if the shutdown is lasting longer. The missing data could feed uncertainty into the Fed’s next decision cycle.
With the September turbocharged rally the equity valuation feels increasingly disconnected from fundamentals.
Shutdowns rarely move markets in the short run. But with a longer shutdown and the absence of reliable data may well become the story, pushing volatility higher once investors realize they are navigating without instruments and put their focus back on the real facts on valuations. Soon the earnings season will kick-off and gives a next indication.
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