02.10.25 - Shutdown day 2: Markets on autopilot
The US government enters its second day of shutdown with a deepening political gridlock. Prediction markets currently see the shutdown lasting nearly two weeks, broadly in line with history. Bank of America data shows the average government shutdown since 1990 has run its course in about 14 days. The S&P 500, meanwhile, has historically gained about 1% in the week before and after such episodes
Yesterday, despite the shutdown released ADP private payroll report showed a decline of 32’000 jobs versus expectations for a 45’000 gain. Today, markets face the risk of a data blackout if the shutdown persists. Key reports from the Bureau of Labor Statistics may not be released on schedule. That would leave the Federal Reserve “flying blind” just as inflation and labor market signals are diverging.
Markets: shrugging of all negative news across the globe
Global equity indices trading all in the green
US Bond yields slightly up after yesterday's drop with the 10-year yield at 4.12%
US dollar tending sideways
Gold prive moves below the USD 3’900/oz level
Cryptos join the risk-on mode with Bitcoin price back close to 120’000 level.
My View:
Markets seem turbocharged by FOMO (“Fear Of Missing Out”) trading on autopilot, dismissing the shutdown, shrugging off weaker jobs data, and continuing their march higher. This underscores that markets rarely see shutdowns as more than short-term noise. History supports this resilience: shutdowns are rarely market-moving events.
The rosy narrative dominates, despite economic data shows some reddish flags. Much of the future success is already priced in today. Political dysfunction and global turmoil are treated as background noise.
This detachment can last longer than many expect, but when momentum finally meets an unwelcome surprise, the adjustment could be sharp. For now, the shutdown is little more than a headline, and the market remains turbocharged.
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