"Bear markets, let's remember, are caused by recessions and, so far, the US economy keeps ticking along...even with a government shutdown the stock market made new highs. Partly that is because markets usually do look through shutdowns, partly it's because this remains a late-cycle grind up with momentum and FOMO driving prices higher. No nonfarm payrolls later due to the government shutdown, so it is kind of tricky for the FX traders and bond markets."
"Stocks don't seem to be mind with Nvidia leading the S&P 500 to a fresh high yesterday at 6,715 at the close, while the Nasdaq Composite hit 22,900 at high before closing just a tad lower. It should be stressed that this time could be different - the longer the shutdown goes on the harder this game of chicken gets and the deeper the economic damage could become."
"If we see some dislocations in bond market prices we could see this feed into volatility in the stock market. The worry in not having the BLS figures is arguably that we could be storing up risk for when they do land. The labour market is looking hard to figure out this time. Challenger job cuts fell in September but YTD it's the highest since 2020 and hiring is at its weakest level since 2009 so far this year."
US equity markets continued to rally to record highs despite a government shutdown, supported by late-cycle momentum and FOMO. Markets often look through shutdowns, but the absence of nonfarm payrolls complicates FX and bond trading and could store up risk. Nvidia led the S&P 500 to 6,715 at the close while the Nasdaq briefly hit 22,900. A prolonged shutdown would increase economic damage and raise the chance of bond market dislocations feeding volatility into stocks. Labour indicators are mixed: Challenger job cuts fell in September but remain highest YTD since 2020, hiring is weakest since 2009, and unemployment sits near 4.3%.
Read at London Business News | Londonlovesbusiness.com
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