2025 has certainly experienced a significant amount of change with tariffs and trade, the Federal Reserve lowering interest rates, international stocks taking the baton from recent U.S. dominance, and most recently the U.S. government shut down amid disputes over spending priorities.
Capital Group’s political economist and former senior advisor in the White House Office of Management and Budget Matt Miller suggests, “there is no indication how long the impasse might last, but a long history of past government shutdowns suggests that, regardless of length, it will have little impact on the financial markets and the U.S. economy. Even during extended shutdowns of two weeks or longer, stocks and bonds have generally weathered the storm with only small ripple effects, followed by a strong rebound.”
“My message for investors is to stay calm and carry on. If history is any guide, the negotiations will be tense, there will be a great deal of political drama, and eventually a compromise will be reached.”
Government shutdowns have lasted an average of 9 days over the past 40 years, but more recently much longer with both sides digging in their heels. Don’t be surprised for this to impasse last awhile.
Historically, these shutdowns have had little impact on the economy. Time will tell if the administration permanently cuts a portion of the non-essential workers which could impact unemployment and consumer confidence.
Turning to a lighter note, October means the MLB playoffs are in full force. Unfortunately, both Ohio teams made early exits in the Wild Card series, but it’s incredible to watch the fans’ enthusiasm during these games. Their passion could be likened to the recent mania around artificial intelligence. Companies across the world are jumping on the AI bandwagon and are spending at unprecedented levels. With AI adoption broadening, we’ll likely continue to see significant investment in infrastructure including data centers and specialized chips.
However, it’s not just the large players like Nvidia, Google, Meta, Oracle and OpenAI benefitting from this shift. The picks and shovels of AI provide the foundational tools, infrastructure, and technologies that drive AI’s development and adoption. For example, the chart below shows 25+ companies involved in the buildout of data centers.
Times will continue to change, but we believe the same foundational building blocks of portfolios remain: time in the market is a time tested approach to successful investing compared to trying to time the market, and diversification across stocks and bonds can provide long-term benefits. We are continuing to keep a close eye on how these types of changes impact the stock market and ultimately the impact on client portfolios. We’ve said it before, “today’s headlines and tomorrow’s reality are seldom the same”.
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