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I would say the U.S. government shutdown is front-of-mind for investors but that’s clearly not the case when it comes to stocks. AI keeps pushing global equity indexes to fresh highs despite the political stalemate in Washington. An OpenAI share sale is keeping things buoyant. The company behind ChatGPT has reached a valuation of $500 billion after current and former employees sold roughly $6.6 billion worth of stock.
Some shutdown angst is driving demand for safe-haven gold and bonds and hurting the dollar. It’s the first government shutdown in nearly seven years, and if it drags on, it could start dampening the mood. Key official data on employment and inflation could be delayed or disrupted, clouding the picture on the health of the world's biggest economy and the path for interest rates.
The outlook for the world’s fourth-largest economy is currently very cloudy. Japan is set to get its second prime minister in just over a year, and as my colleague Hudson Lockett over at BreakingViews puts it, the PM contest is a battle for Japan’s fiscal soul. Frontrunner Sanae Takaichi has broken with the ruling LDP's tight-fisted orthodoxy by calling for government spending to boost growth, and that has investors nervous. Japan had two poorly received debt auctions this week as bets on an early interest rate hike add to the pressure.
Back in the U.S., a monthly payrolls report seems unlikely now to be released on Friday, putting an overnight ADP employment report that shows the economy unexpectedly shed jobs in September into sharper focus. Traders are now pricing in two quarter-point Fed rate cuts by the end of the year as almost a done deal.
Governor Lisa Cook will be at the table for both those rate decisions after the U.S. Supreme Court blocked President Trump’s attempt to immediately fire her. The justices will instead hear arguments in January on the case, teeing up a major legal battle over the Fed’s independence.
The January timing of the arguments may make it more likely that new Governor Stephen Miran, a Trump appointee, returns to his job as chair of the president's Council of Economic Advisers when his Fed term expires in January. With Cook still on the board, Miran's seat would be needed for the appointment of a new Fed chair to replace Jerome Powell when his term expires in May.
The U.S. pharmaceutical sector is currently in focus for the Trump administration. Pharmaceutical executives are getting near-daily calls from staff at the White House - including Chief of Staff Susie Wiles - and senior figures at agencies like Health & Human Services and the Commerce Department, sources have told Reuters.
But pharmaceutical companies are just the tip of the iceberg. The Trump administration is pursuing deals across up to 30 industries, involving dozens of companies deemed critical to national or economic security. The fast-paced dealmaking is designed to deliver political wins for Trump before the 2026 midterm elections.
One constituency expecting a big win this year is Wall Street. Senior bankers have told Reuters they expect big banks’ capital requirements to remain flat or fall – a dramatic turnaround for the industry which faced a 19% hike in 2023.
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