Government Shutdown, Labor Slowdown, but the Economy is Holding
The financial landscape in October presented a unique mix of political headwinds and surprising economic resilience. The fourth quarter has included the longest government shutdown on record, occurring alongside an election cycle that suggested some voter dissatisfaction with the current situation. While these events can create uncertainty, the broader economy appears to be holding steady. Anecdotal evidence from various brands indicates that consumers are still spending, even with an understandable dip in consumer sentiment.
October Recap
The Federal Reserve met at the end of October and executed a key rate cut, moving the Fed funds rate to a range of 3.75%-4%. However, the Fed’s guidance was clear that a further rate cut in December is not guaranteed.
Let’s get into the data:
- The government shutdown has paused the release of official government data sources, including labor statistics.
- The Chicago Fed’s estimate for the unemployment rate, which integrates both public-sector and private-sector data, rose to 4.36% in October, up from 4.23% in August.
- Focusing only on private-sector employment, ADP reported a gain of 42,000 jobs in October. This marks a return to growth after two consecutive months of contracting labor market data.
- The University of Michigan Consumer Sentiment Index decreased by 3 percentage points in November, reaching its lowest level since 2022.
- The Atlanta Fed’s GDPNow model currently estimates real GDP growth for the third quarter of 2025 at 4% (seasonally adjusted annual rate).
What Does the Data Add Up To?
While the markets have largely overlooked the government shutdown so far, the rising number of canceled flights at various airlines across the country may pressure Congress to reach a resolution. Thus far, the markets have shown continued confidence in the economy despite the lack of official government data.
The picture regarding the Federal Reserve has become more complex. The Fed Funds rate is a key economic indicator because it serves as a benchmark for both commercial and consumer interest rates. This rate impacts banks’ overnight lending costs and influences the prime rate, which in turn sets the level for mortgages, credit cards, and auto loans. A loose monetary policy, where it is easier for businesses to access expansion funds and for consumers to carry debt, supports economic growth.
Rate cuts were widely expected this year as inflation began to normalize and the labor market remained solid. However, the uncertainty introduced by tariffs and the recent government shutdown has led to revisions in the expected path of interest rates. Fed Chairman Powell was explicit that a further rate cut in December might not occur. Despite these factors, equity markets have generally delivered solid performance, with momentum-leading investment themes benefiting from corporate tax incentives and individual tax refunds, which support corporate earnings and consumer spending.
Chart of the Month: Inflation is holding steady
Source: Axios
Equity Markets in October
Equity markets demonstrated mixed results for the month of October:
- The S&P 500 advanced 2.27%.
- The Dow Jones Industrial Average gained 2.51%.
- The S&P MidCap 400 declined 0.53%.
- The S&P SmallCap 600 decreased 0.95%.
Source: S&P Global. All performance as of October 31, 2025.
Six of the eleven S&P 500 sectors posted positive returns. Five of the Magnificent Seven stocks saw gains, while Meta and Microsoft declined. Volatility, as measured by the VIX, increased to 1% in October, up from 0.69% in September. Four of the 23 trading days in October moved at least 1%, compared to zero such days in September.
Bond Markets in October
The U.S. Treasury yields generally moved lower in October:
- The 10-year U.S. Treasury yield finished the month at 4.09%, down from 4.16% the previous month.
- The 30-year U.S. Treasury yield ended October at 4.66%, down from 4.74%.
- The Bloomberg U.S. Aggregate Bond Index returned 0.38%.
- The Bloomberg Municipal Bond Index returned 1.10%.
The Smart Investor
November is an excellent time to conduct a disciplined review of your financial plan and goals to proactively ensure you remain on track.
- Retirement Contributions: If you are age 60 or older, you have the opportunity to add significantly more to catch-up contributions for your tax-advantaged retirement plan this year. Next year, this must be done in a Roth account, so leveraging the current contribution boost can be beneficial. If you are not eligible for catch-up contributions, maximizing your regular contribution is key to receiving any company match and securing the maximum tax advantages.
- Charitable Giving: Thoughtfully structuring your charitable contributions and overall giving strategy before year-end is a worthwhile exercise as the holiday season approaches.
- Tax Strategy: Given the recent market volatility, reviewing your investment gains and losses and implementing a tax-loss harvesting strategy before year-end can also help optimize your tax picture.
Taking a careful look at these elements now and planning for the year-end is an intentional step that helps you execute a tax strategy aligned with your long-term wealth goals.
If you want to see how our team at Ceva Advisors can apply these insights to your unique situation, you reach out to our team through our website to start a conversation today.
IMPORTANT DISCLOSURE: This article is produced by Ceva Capital LLC dba Ceva Advisors. The information contained in this report is informational and intended solely to provide educational content to our clients and other readers that we find relevant and interesting. Opinions expressed are just that, and are current only as of the data of publication Nothing in this document should be construed as investment advice; we provide advice on an individualized basis only after understanding your circumstances and needs. Data provided comes from sources we believe are reliable, but accuracy is not guaranteed. Discussion of sectors and the performance of region-specific equities and bonds generally refer to market indices. We use the S&P 500 to represent US large-cap; the Willshire Small Cap to represent US small-cap; the MSCI ACWI ex US to represent international equities; the US 10-year Treasury Yield to represent US Treasuries; the ICE BofA European Government Bond Index to represent European bonds; the ICE BofA US Corporate Index Effective Yield to represent investment-grade bonds; the ICE BofA US High Yield Index Effective Yield to represent high-yield bonds. Indices are unmanaged, are not subject to investment management fees or transaction costs, and it is not possible to invest in an index. Index performance can provide general information about how a particular region or investment has performed, but does not provide information about the performance of Ceva’s client portfolios. Actual client performance may differ materially from the index performance discussed. Past performance is not a guarantee of future results. Financial planning is a tool that can help clients consider different current and future scenarios and construct portfolios designed to meet specific goals and address specific risks. Financial planning does not guarantee a positive outcome or prevent loss. It’s important to revisit financial plans and the underlying assumptions of those plans regularly, and to make adjustments as needed to respond to changing circumstances.
