While the government shutdown is over, there continues to be an economic data blackout that will take some more time to work itself out and this is partly why stocks have been range-bound. This data drought comes at a time when there were significant worries about the state of the labor market over the summer and in September, just prior to the shutdown. Investors are eager for more data on the state of the labor market and inflation.
Even with the lack of economic data, we still think the Fed will cut rates in December, as they would prefer to be safe rather than sorry, since there has been enough private sector labor market data to confirm that the labor market has indeed cooled.
Even with the government shutdown behind us, we expect some market bumps over the next few months as the resumption of the economic data reports may cause some volatility and as investors digest the eventual resumption of the economic data reports, particularly as investors start to price-in what markets will look like in 2026.
Our message to investors is to stay invested and prepare for the seasonal year-end strength that we typically see around this time of year.
Better-than-expected earnings have been one of the main reasons keeping stocks elevated, and we expect this strong earnings dynamic to continue powering stocks well into 2026 as companies are becoming more efficient, which is driving margins.
