As the government shutdown stretched into record-breaking territory, the economy remained in a state of uncertainty, and financial markets showed signs of unease. News of an end to the shutdown over t...
As the government shutdown stretched into record-breaking territory, the economy remained in a state of uncertainty, and financial markets showed signs of unease. News of an end to the shutdown over the weekend provided a boost to equities with a risk-on sentiment and a slight weakening in rates. With Nonfarm Payroll (NFP) data unavailable for a second consecutive month, investors are increasingly turning to alternative sources of labor market insight—most notably, data from Challenger and Revelio Labs, which have traditionally been overlooked.
Adding to the growing list of factors influencing market sentiment, the Supreme Court is expected to rule in the coming months on the legality of President Trump’s tariffs, a decision that could carry significant economic and political weight. At the core of the case is whether the administration had the authority to impose broad sanctions on U.S. trading partners under emergency powers. If the Court rules against the former president, it could trigger a massive refund of tariff revenues collected to date.
Equity markets pulled back last week, retracing from the recent S&P 500 peak reached on October 30th. The question now is whether this marks the beginning of a broader and more sustained sell-off. Notably, several prominent CEOs (including David Solomon, Jamie Dimon, and Larry Fink) have publicly suggested the possibility of a 10–20% correction over the next 12 to 24 months. Additionally, famed speculator Michael Burry, depicted in the movie “The Big Short,” announced a $1 billion trade that Wall Street’s AI boom will end in tears. I’ve been skeptical that the market could sustain its momentum through the end of this year without correction. This could be the start of that move. Meanwhile, interest rates entered a consolidation phase mid-week, supported by stronger-than-expected ADP employment data, robust ISM Services readings, and Department of the Treasury commentary hinting at future increases in auction sizes. The 4% threshold remains a reasonable floor for 10-Year Treasury rates, especially in light of decreased expectations for further rate cuts.
Fed officials continue to weigh in on the direction of monetary policy amid persistent inflation concerns and signs of a cooling labor market. Chair Powell’s recent remark that a December rate cut is “not a foregone conclusion, in fact, far from it” has support among some Committee members. However, views remain divided. Hammack has voiced hawkish concerns over elevated inflation, and Williams and Goolsbee - who supported rate cuts in September and October - now appear less urgent in their stance. On the other hand, Waller and Miran continue to advocate for a cut in December, underscoring the ongoing debate within the FOMC.
From the Municipal Desk (with contributions from Ryan Riffe):
The municipal market see-sawed with Treasury yields over the course of the week as fixed-income markets sought to digest light economic data, quarterly refunding announcements from the Treasury, and ongoing questions about the legality of Trump tariffs. Although total supply increased to $14+ billion (up from $8b), the market once again demonstrated resilience in its ability to absorb a larger calendar. Heavy inflows into municipal funds and ETFs continue to drive positive momentum, with demand concentrated on the intermediate and long-end of the curve. Front-end weakness was evident as syndicate balances for 1 to 5 year maturities were noticeably larger. Supply will drop this week to a modest $9.5 billion, with markets closed Tuesday for Veterans Day. We remain optimistic for the overall market as year-end technical factors remain strong, and likely year-end portfolio activity should be robust.
30-Day Visible Supply @ $12.57 Billion
Weekly Calendar expected @ $9.5 Billion
2-YR Ratio @ 69%
3-YR Ratio @ 69%
5-YR Ratio @ 65%
10-YR Ratio @ 67%
30-YR Ratio @ 88%
An index is unmanaged and not available for direct investment. Definitions sourced from Bloomberg.
The Bloomberg Barclays Global Aggregate Negative Yielding Debt Market Value Index represents the portion of the Bloomberg Barclays Global Aggregate Index that measures the aggregate value of global debt with a negative yield. • The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. • The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.• The Cboe Volatility Index® (VIX) is a calculation designed to produce a measure of constant, 30-day expected volatility of the US stock market, derived from real-time, mid-quote prices of weekly S&P 500® Index (SPX) call and put options with a range of 23 to 37 days to expiration.• The ICE BofA MOVE Index is a yield curve weighted index of the normalized implied volatility on 1-month Treasury options. It is the weighted average of implied volatilities on the CT2 (Current 2 Year Government Note), CT5 (Current 5 Year Government Note), CT10 (Current 10 Year Government Note), and CT30 (Current 30 Year Government Note), with weights 0.2/0.2/0.4/0.2 respectively.• The Markit CDX North America Investment Grade Index is composed of 125 equally weighted credit default swaps on investment grade entities, distributed among 6 sub-indices: High Volatility, Consumer, Energy, Financial, Industrial, and Technology, Media & Tele-communications. Markit CDX indices roll every 6 months in March & September. • The Markit CDX North America High Yield Index is composed of 100 non-investment grade entities, distributed among 2 sub-indices: B, BB. All entities are domiciled in North America. Markit CDX indices roll every 6 months in March & September. • The U.S. Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. Intercontinental Exchange (ICE) US computes this by using the rates supplied by some 500 banks.
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