Small business optimism softened, but consumer spending remains resilient; the government shutdown’s end triggered a rotation into blue-chips and lifted the Dow above 48,000, yet markets now face elevated volatility as investors await a flood of delayed economic data and key Fed decisions.
Week’s Key Items:
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Lower sales and reduced profits led small business optimism to slip in October. The NFIB Small Business Optimism Index declined 0.6 points month-to-month to 98.2. Despite the drop, the index still remained above its 52-year average of 98. The Uncertainty Index also slipped, falling 12 points from the prior month to 88, the lowest reading of the year. At the same time, small businesses continued to face hiring challenges, with many citing labor quality as their top concern.
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With the U.S. shutdown delaying the release of the U.S. retail sales report, investors turned to the Redbook Index to gauge consumer spending. The Redbook Index, a weekly indicator of same-store sales growth across approximately 9,000 large U.S. retailers and representing over 80% of official retail sales increased 5.90% year-over-year in the week ending November 8. That was up from 5.70% the previous week. It is also well above the 10-year average of 3.75%. The reading signals continued retail resilience and suggests robust holiday sales despite labor market weakness and elevated prices.
Fall in Rate Cut Expectations Hammers AI Trade
The end to the longest government shutdown in U.S. history and the great rotation out of AI stocks helped lift the Dow Jones Industrial Average to its first close above 48,000. The S&P 500 also managed to move higher for the week, bolstered by investors moving into large, well-established, blue-chip stocks. The record-setting 43-day government shutdown came to an end late Wednesday night with President Trump signing a short-term spending bill which would fund most federal agencies through January 30th. The bill also reverses layoffs imposed during the shutdown, provides backpay for federal employees, and institutes protections against further layoffs. However, the central issue underlying the shutdown, extensions on Affordable Care Act subsidies that expire at the end of the year were not addressed in the bill. Instead, a vote is expected in mid-December on Democrat-drafted legislation aimed at extending those subsidies. Congress also still has work to do on the nine full-year government funding bills that were supposed to become law before Oct. 1 which were not included in the package signed Wednesday. Lawmakers will need to pass all of these bills or another short-term funding bill will be needed before the January deadline. Markets are sure to keep a close eye on developments for a potential shutdown repeat. On the economic front, inflation and retail sales reports were once again suspended due to the closure, leaving investors to focus on renewed volatility in the equity market. Despite the late week sell-off, the Dow managed to finish the week higher as investors rotated into ‘old economy’ companies and out of pricey AI stocks.
It’s been a bumpy ride for investors thus far in November. Shutdown anxiety, AI valuation concerns, and a blind spot on the economy’s fundamentals after nearly seven weeks of having no government economic data has started to show. The initial rally on the announcement of the government’s reopening will now rely on what the flood of official data actually reveals beginning next week. These data releases will be critical not only for investors, businesses, and consumers but also for the Federal Reserve as it weighs whether to lower interest rates in December. Absent official economic data, Fed officials’ public statements carried additional influence this week. Many expressed caution about another rate cut, arguing that inflationary pressures still outweigh labor market weakness despite the prolonged shutdown. The Cleveland Fed’s Inflation Nowcast, which provides daily estimates of inflation for two popular prices indexes, the price index for personal consumption expenditures (PCE) and the Consumer Price Index (CPI), are estimating inflation to be up 3.00% YOY. That remains above the Fed’s 2.00% target level. Meanwhile, private data provider Haver Analytics reported labor market conditions remained stable for the week ended November 8 with initial claims for unemployment benefits dipping to 227,543 from 228,899 in the prior week. Given the Fed’s dual mandate of price stability and employment, markets expect the central bank to focus on inflation, repricing odds to reflect just a 46% chance it will cut its benchmark overnight rate by a quarter percentage point. That’s down from a 66.9% chance last week. Given the market’s craving for lower rates and inflation’s stubbornness, market volatility is likely to remain elevated through year-end.
The Week Ahead
Key reports include the S&P Flash U.S. Manufacturing PMI and Existing Home Sales.
Giving in America
The month of November ushers in a season of both gratitude and giving. It is a time for individuals to pause and reflect on what they are thankful for and, for those who are charitably inclined, to participate in giving back to their communities and to causes that are important to them. An annual report from Giving USA offers a powerful reminder of just how deeply Americans care about making a difference. Giving USA: The Annual Report on Philanthropy is the longest-running and most comprehensive report on the sources and uses of charitable giving in America. It is researched and written by the Indiana University Lilly Family School of Philanthropy. The Giving USA report shows that, in 2024, U.S. charitable giving surged to $592.50 billion, a 6.3% rise over the prior year, and outpaced inflation for the first time in three years. Giving from individuals, foundations, corporations, and bequests, when adjusted for inflation, increased by 3.3% from the previous year’s total of $557.16 billion.
Giving by individuals reached a staggering $392.45 billion, or roughly two-thirds of all donations. This was an 8.2% increase over the prior year. Foundations surpassed $110 billion in grants, and corporate giving continued its strong growth pattern, up 6% from 2023 to a record $44 billion. Bequests, which are known to fluctuate yearly, declined 4.4% when adjusted for inflation.
Four of nine subsectors tracked by Giving USA reached their all-time highs in 2024, even when adjusted for inflation. These include education; health; arts, culture and humanities; and environment/animals, reflecting broad donor commitment to these causes. The biggest year-over-year jump included the subsector of public-society benefit which was up 19.5%. This category of giving, as defined by Giving USA, includes organizations focused on civil rights, social action, advocacy, and community improvement. Examples of organizations within this category are the United Way, American Civil Liberties Union, and Jewish Federations.
The list below shows the breakdown of giving to recipients:
Religion………………….
Human Services………………….
Education…………………
To Foundations……………….
Public-Society Benefit……………$66.84 billion
Health……………………
International Affairs……………..$35.54 billion
Arts, Culture, and Humanities….$25.13 billion
Environment and Animals……….$21.57 billion
The giving trends reflected in the report demonstrate a generous national spirit and a long-standing commitment to philanthropy in the U.S. Our advisors are available to help individuals, families, and businesses explore tax efficient giving strategies such as Qualified Charitable Distributions, gifts of highly appreciated stocks, donor advised funds, and more to help maximize giving intent. Higher income individuals may wish to discuss tax advantages for accelerating giving within 2025, prior to legislative changes that take effect in January 2026.