Reopened Uncertainty
The Federal Reserve delivered the quarter point rate cut the markets had been expecting in their last meeting. But, with no data available for October due to the shutdown of the government and specifically the Bureau of Labor Statistics (BLS), we now have to ask “What is a ‘data dependent’ Fed likely to do?
ADP has been helping out with weekly jobs reports, and other non-governmental data sources will supply some of the missing data. The Federal Reserve and the stock and bond markets will pour over what will now be released in order to glean just where we are. Chair Powell told us not to expect another rate cut in December, despite what markets have been expecting. We believe they are likely to go into a “wait and see mode.”
Why do investors care about Labor market data?
We care because we know the consumer (who makes up 70% of the economy) will spend if they are employed. If they are not working, as was the case for last 40 plus days, they will pull back on spending, and the stock market will likely react with a similar pullback.
So – Labor is weakening, and the Federal Reserve has acted to stimulate the economy to go from “Low Hire, Low Fire” to “Increase Hire and Stop any Fire.” Rate cuts may not get that job done however. Again, in the absence of data from the BLS we have had to rely on other sources and activity in the stock and bond markets to get a sense of whether the economy is really growing – or not. The anticipated “data dump” that may come from the now reopened government agencies may not offer the clarity that markets and the Federal Reserve rely on. The disruption in paychecks will likely cause many consumers to remain cautious consumers, and this suggests we should expect a slight pullback in GDP for the remainder of the year.
Recently the stock and bond markets had advanced nicely, and the S&P 500 Index is now up Year to Date +15.04% (Yahoo Finance 11-14-25). We anticipate a positive end-of-year figure, but whether it will still go up from here is very hard to forecast.
A last word or two on inflation – Neil Dutta of Renaissance Macro recently said on Bloomberg that the 10 year Treasury Bond hovering around 4% tells us the bond market is not recognizing the slowdown in the economy.
Tariff induced inflation
Tariff induced inflation is only now seeping into the wider economy. Tariffs have not seemed to notably decrease earnings. Companies have been offsetting their costs elsewhere, and the data from before the shutdown had not reflected meaningful inflation in goods and services. But consumers are aware of the inflation they see at the grocery store, and the recent off year elections turned that awareness into a shout. We are likely to hear a lot about “affordability” as we turn into the election cycle in 2026. This process will likely spawn waves of uncomfortable volatility, perhaps even in the Go-To large cap AI and AI adjacent parts of the equity markets.
As always, we investors have to rely on tried-and-true investment management. Namely, own great companies with lots of free cash flow, who pay dividends, who have a long history of raising those dividends, and have lots of cash on hand to weather any storm that may arrive. At least that is our guiding set of principals as we work through a very uncertain time.
Linda Erickson, CFP™ / Financial Advisor
The views stated in this letter are not necessarily the opinion of Cetera Wealth Services LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with or without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
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