Good morning,
Last week, equity markets climbed higher despite the ongoing government shutdown, with the S&P 500 Index gaining +1.08% for the week. Bond yields softened (prices up) as investors grew more confident that additional rate cuts are coming. While the official monthly jobs report was delayed due to the shutdown, we did get private-sector data from ADP, which showed the largest decline in employment since 2023.
We remain in uncharted territory as the shutdown drags on with no “can” yet set up to kick down the road. It’s starting to feel a bit like a Jack-in-the-box—music still playing, but we all know what’s coming when it stops.
Interestingly, the market’s attention this morning is on global politics, not domestic ones. In France, a newly formed government collapsed within 24 hours, likely setting the stage for fresh elections. French assets—OATs and the CAC 40—have come under sharp pressure, and the euro has slipped as well.
Meanwhile, in Japan, the likely ascension of pro-stimulus candidate Sanae Takaichi as the next prime minister has rattled both the long end of the JGB curve and the yen. Thirty-year yields have reached their highest level since Bloomberg began tracking them (40 yrs?), and the once-dominant narrative of a “global savings glut” feels increasingly outdated.
The U.S. fiscal picture is hardly an oasis of virtue, but for now, there’s little sense of crisis on this side of the Atlantic. None of this global political turbulence seems to be slowing the AI-driven momentum in U.S. equities. Futures point higher again this morning—investors are still happy to sail merrily along despite the stormy seas abroad.
Be well,
Mike