MARKET COMMENTARY

Below are the economic and market highlights for the week: 

1. The federal government shutdown delayed the release of the September nonfarm payrolls report, leading Wall Street to turn to private jobs data to assess the health of the labor market. Payrolls processing firm, ADP, reported companies shed 32K jobs in September, the biggest slide since March 2023. August payrolls were revised to a loss of 3K jobs from an initially reported increase of 54K. Despite the hiring slowdown, wage growth remained hot in September, higher by 4.50% on an annual basis. Meanwhile, the Chicago Federal Reserve released data on the labor market which included layoff and hiring rates. The layoff rate was little changed at 2.10% in September while the hiring rate moved lower to 45.22% from 45.61% in the prior month. The unemployment level rose to 4.34%, up slightly from 4.32% in August.

2. Manufacturers continued to struggle under the weight of high tariffs, rising prices, and reduced consumer demand. The ISM manufacturing index inched up to 49.1 in September, up from 48.7 in the prior month. Numbers below 50 indicate contraction while those above signal expansion. September’s reading marked the seventh straight month of recession as most manufacturers scaled back production plans and reduced employment to contain costs. Despite the headline figure moving higher, businesses qualitatively described a rather grim picture. ISM survey respondents flagged depressed demand and lower profits driven by higher tariffs which are leading to lower orders as customers react to higher prices. Meanwhile, the services industry stalled in September with the ISM Services Index holding steady at 50. Business activity and employment remained in contraction while the inflation reading remained elevated.

Stocks Shrug Off Government Shutdown

As the federal government shutdown dragged into its third day, bringing Washington to a standstill, Wall Street defied the turmoil, climbing to fresh record highs on Friday. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite indices all hit fresh all-time highs during the trading session. All three major indices are off to a strong Q4 start, building off solid Q3 gains. The tech heavy Nasdaq Composite Index finished Q3 on top, up 11.20% for the quarter on AI driven momentum. The S&P 500 followed, rising 7.79%. The blue-chip Dow lagged its tech heavy peers but still managed a respectable 5.22% gain. Investors were primed to add to their year-to-date gains with all eyes focused on today’s payrolls report and implications for the Federal Reserve’s monetary policy. However, as the clock struck midnight on Wednesday, data watching turned to Capital Hill monitoring as Dems and Republicans clashed over terms to keep the federal government open. Consequentially, we now find ourselves in the midst of the nation’s 22^nd federal government shutdown since the modern budgeting process began in 1976. It also set off a chain of events that halted some government services, furloughed 750K government workers, and delayed the release of key economic reports including the September nonfarm payrolls and weekly jobless claims reports. Markets, however, took the news in stride, scoring new record highs on Thursday and Friday as investors remained confident the closure would be short-lived, and it would be back to business in short order.

The run to new record highs is not surprising despite the stalemate in Washington. Wall Street widely expected the current government shutdown, penciling in a roughly two-week duration, in line with past government shutdowns. Aside from the federal worker furloughs, the economic impact is forecasted to be minimal. Economists calculate the impact to be about 0.1 percentage point off gross domestic product per week. That’s not much for a $30.50 trillion economy. Even if the shutdown lingers, the impact should still be modest. The longest closure lasted for 35 days under the first Trump administration and went from late 2018 until the following January. That shutdown shaved 0.4 percentage point in the first quarter of 2019 but was subsequently recouped once the government was reopened. Market selloffs in response to shutdowns have historically been modest as well. The average decline for the S&P 500 during a shutdown is about -1.60%, with the worst being -6.10% during the 1979 shutdown. The longest shutdown in 2018-2019 saw the S&P 500 rally over 10% which was driven largely by Fed policy shifts. What really matters most to investors is Fed policy, economic indicators, and corporate profits. The “this time is different” camp have raised concerns that the shutdown could be used as a tool to permanently reduce the Federal workforce, adding to what appears to be a weakening job market. That, however, could have a silver lining for the economy as it could force the Fed to move more aggressively to cut rates. Markets for the time being seem content to let the political brinksmanship play out, and lacking any official data to contend with, the bulls remained solidly in control. 

The Week Ahead

Key reports include consumer sentiment and the U.S. trade balance – maybe…. 

Protecting Yourself from Identity Theft 

Identity thieves are constantly developing new tactics to target victims and exploit personal information, often leading to serious financial crimes such as credit card fraud, tax refund scams, loan or mortgage fraud, and unauthorized account access. In response, our advisors have been sharing proactive strategies that may serve as a first line of defense against identity theft and related financial fraud. Below are recommended steps that individuals can take to help protect their personal information and reduce the risk of becoming a victim. This list is not comprehensive, so we remind everyone to be vigilant.

1. Strengthen Your Logins

• Use a different password for each account.
• Consider a password manager to securely store and generate passwords.
• Turn on two-factor authentication wherever available, such as for online banking, email, and brokerage accounts.

2. Lock Down Your Credit

• Place a credit freeze with all three credit bureaus including Equifax, Experian, and TransUnion.
• Add a fraud alert for extra verification if you suspect you may be at risk.
• Review your credit report annually at www.annualcreditreport.com.

3. Monitor Your Finances

• Sign up for alerts from your bank and for credit cards for transactions or transfers.
• Review statements regularly to catch suspicious activity early.
• Keep daily spending in a smaller account; hold savings/investments separately.

4. Guard Personal Information

• Shred sensitive documents before discarding.
• Limit what personal information you share on social media, such as birthdate, address, and family details.
• Opt for paperless statements and billing to reduce mailbox theft.

5. Protect Your Devices & Networks

• Keep phones, computers, and software up to date.
• Use antivirus or security software.
• Avoid logging into financial accounts on public Wi-Fi (or use a VPN).

6. Know Your Safety Nets

• Ask if your homeowner’s or renter’s insurance includes identity theft coverage.
• Confirm your financial institution’s fraud-protection policies.

The top three steps to take to help guard against identity theft that will have the biggest impact are as follows:

1. Freeze your credit.

2. Use strong, unique passwords and Two Factor Authentication.

3. Set up account alerts.

The checklist above is provided for informational and educational purposes only, and is not a substitute for personalized legal, tax, or

financial advice. Please consult your advisor and any qualified professionals regarding your personal situation. Stay safe out there!