October 2025 Financial Focus
October: A not so Spooky Market
The Government Shutdown: Market Impact
Since October 1st, 2025, the U.S. government has been in a shutdown. What does that mean? Parts of the government deemed non-essential and unable to fund themselves are forced to cease operations. Some employees are furloughed, others are told not to work, and a few, like TSA agents, continue working without pay (though they’ll receive back pay once the government reopens).
As financial advisors, we try to stay focused on market impacts, but it’s hard not to point this out: it must be nice to disagree, fail to compromise, collect a paycheck, and let thousands of others go unpaid in the process. Our “essential” politicians keep working while many Americans are told they can’t. Both sides are digging in their heels, and the American worker is paying the price.
Not all shutdowns are the same. There are two types: one driven by a debt ceiling crisis, which is much worse for markets, the other; an appropriations shutdown, where non-essential services are paused until funding is agreed upon. For investors, this is the better of the two.
Since 1976, there have been 20 shutdowns due to lapsed funding, and 14 of those lasted less than three days. As of October 30th, this current shutdown is the second longest on record, closing in on the 35-day record set in 2018. The biggest economic concern is the delay in key data releases, such as inflation (CPI) and labor statistics that the Federal Reserve relies on when setting interest rates.
Recently, the Bureau of Labor Statistics was deemed “necessary,” and the data came through after all. Inflation landed at 3%, above the Fed’s 2% target but lower than expected, while job growth remains mixed. With mixed data, and the government still shut down, the Fed surprisingly stayed on course and lowered interest rates by another 25 basis points: a move the market had already priced in following direction from the September meeting. This consistency likely helped maintain market confidence.
However, the decision was not without friction. Internal disagreements at the Fed resurfaced, with one member advocating for a larger cut and another pushing for no cut at all. This leaves December as another key decision point, as earlier guidance suggested two more cuts by year-end. Yet Fed Chair Powell remained characteristically vague about future moves; a style he is well known for.
For now, we do not expect the shutdown to significantly harm markets. Historically, markets often perform well during and after shutdowns, which has been the case so far. Still, the longer this one drags on, the more uneasy investors and workers alike may become.
We certainly feel for those caught in the crossfire of political dysfunction. Hopefully, both sides find compromise soon so the government can return to full operational capacity and Americans can get back to work.
Partnering with you on your financial journey.
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