This serves as a recap for myself and is not to be viewed as any kind of trade suggestion. All views expressed are my own.
The US government officially went into a shutdown on 10/1. The impact on markets is less obvious immediately, barring that several key data releases from the BLS, BEA etc. will be suspended until the government reopens.
This means that on Thursday and Friday, we did not get the weekly jobless claims data and the non-farm payrolls data. This means private numbers like ADP and ISM index might carry more weight in gauging the economy, as long as the data releases remain suspended.
But in any case with the lack of datapoints or any significant triggers, the market is apparently not overly worried about the economy so far, and have been chugging along just fine this week. The idea appears to be that the Fed is now on track to cut 25bps each meeting with or without economic data.
And as I said in my previous post, I personally think the Fed has now moved the goalpost, meaning that inflation is deemed to be a non-issue so far (whether that is the case is clearly up to debate), and that the labor market weakness has taken centerstage. This compels the Fed to resume and sustain rate cuts, as long as inflation doesn’t come shooting straight up.
Personally, I think even if inflation picks up slightly, they will still cut, because transitory/one-time shift (or politics).
So what does that mean? Like I said a few posts ago, I think this means that the market can grind higher. There will be short term corrections from growth scares or other triggers, but dips will generally be buyable.
If we enter into a recession or something more severe, the correction might be deeper and faster, but I still view it likely that dip buyers will come in quickly. Because after all if the Fed is cutting and the president has been calling for further cuts with potential to generate inflation, it doesn’t seem so much of a great idea to be holding a bunch of cash.
Short term though, retail sentiment has been elevated for 3 weeks now. It’s cause for caution for short term tops, which Friday looks like could be one, but the sentiment can also stay elevated and actually buoy the market.
Additionally, the CNN fear and greed is still pretty neutral now. Under the hood is a bit more mixed so how much this can tell us I’m not sure. If anything it says that the market is probably not incredibly greedy at least in the short term. Does this mean that maybe it’s “smart money” that is a bit more cautious? If so then could be toppy.
The Ephemeral Tourist
October 5th. 2025 @ 10:20pm CST
The Ephemeral Tourist 