Stocks and Bonds Gain Despite Poor Economic News and Government Shutdown
Good morning, and welcome to the 4th quarter of 2025,
The Dow (+1.1%), NASDAQ (+1.3%) and S&P 500 (+1.1%) each posted gains last week and also set new all-time highs. Meanwhile, taxable bonds gained 0.5% and tax-free municipal bonds gained 0.3%. The 10-year Treasury yield fell 0.06% to finish the week at 4.12%.
Due to the government shutdown, the September monthly labor statistics were not reported. Thus, investors and economists relied on the ADP report on Thursday, which showed that private payrolls fell for September, compared to an expected gain. The Institute of Supply Managers (ISM) Manufacturing and Services also came in below expectations, as the manufacturing sector remains in contraction while services remain in expansion. Regardless, the markets responded to these data as “bad news is good news”, as investors considered this weak economic data to support the Fed to cut interest rates again soon.
As for the 800-pound gorilla in the room, Congress was unable to agree on a budget, sending the government into a shutdown effective last Wednesday, October 1. The political game is quite annoying to me, as the government seems to not consider my opinion before making decisions, but I digress. I was quite surprised that the markets went up, and Cornerstone Portfolio Research (CPR) provided this table reflecting market performance during each of the previous five shutdown over the last 30 years. As noted by the table, the markets have generally performed well during shutdowns, but let’s not cheer so quickly. The concern is that if the shutdown lasts more than 30 days, many government workers will have missed two consecutive pay checks, which could be problematic for those folks who live paycheck to paycheck. See the table below.
September has historically been the worst performing month for stocks. This year, we bucked that trend with market indices gaining 2.7% - 6.2%. We also completed the 3rd quarter with stock indices gaining 6.0% - 11.8%. Diversified portfolios (which also include bonds) were up about 4% - 7% for the quarter. In short, investors may be pleased when they receive their monthly and quarterly statements in the coming week.
Have a great day and terrific week and see the weekly and monthly recaps provided by CPR, our CFA consulting team.
Source: Yahoo Finance
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
