The Government Shutdown Nobody's Bothering to Notice (And Why That's Dangerous)
The U.S. federal government has been partially shut down for nearly a month. We're now in the longest full shutdown in American history. Somewhere in the political theater of Washington, that fact would normally matter. To markets, it barely registered as a hiccup.
This deserves to scare you more than it does.
When Data Blackouts Become Comfort
Let's be precise about what's happening. Since October 1st, we've lost the September jobs report—the single most important economic indicator for Fed policy. We're flying blind through inflation season, trade war season, and the crucial final sprint toward a Federal Reserve decision. The economic calendar that Wall Street depends on to calibrate reality has been replaced by silence.
In normal times, this would trigger chaos. The market would demand answers. Where are the employment numbers? What does the labor market actually look like beneath these headlines about mysterious layoffs and hiring freezes? Instead, markets have treated the data void like a feature, not a bug. The S&P 500 hit fresh all-time highs as September inflation came in cooler than expected at 3% headline versus 3.1% forecast. That's it. One data point. One reassurance. Onward to the moon.
The danger here isn't that we're uninformed. It's that we've decided being uninformed is fine.
The Confidence Game Has Its Limits
Netflix dropped 10% on missed subscriber guidance and weak forecasts. Texas Instruments provided a tepid outlook that sent semiconductor expectations tumbling. General Motors, by contrast, hiked full-year guidance and posted earnings of $2.80 per share versus $2.31 expected, with revenue of $48.59 billion beating estimates. Tesla reported record Q3 revenue of $28.1 billion but earnings of $0.50 per share came in 9% below expectations.
This is what earnings season actually looks like right now: a bifurcated market where profit beats meet cautious guidance. The winners are companies with fortress balance sheets and pricing power. The losers are anything exposed to margin compression, labor cost inflation, or demand uncertainty. The market has decided this is fine. Winners get higher multiples. Losers get sold.
But here's what the market isn't pricing in: the earnings season we can't see because the government data infrastructure is offline.
The Real Story Buried in the Budget Battle
The U.S. government shutdown began on October 1st and has become the longest full shutdown on record. Somewhere in that political standoff, federal workers are getting furloughed, economic statistics are being delayed, and the very machinery that lets markets function—data verification, financial oversight, regulatory clarity—is grinding to a halt. This isn't metaphorical disruption. It's the actual scaffolding of capital markets going dark for weeks.
And what do markets do? They bought the dip. The Nikkei hit 49,299. Shanghai added 27.9 points and the Hang Seng rose 192 points. Asia shrugged. Wall Street rallied on cooler inflation and the promise of Fed rate cuts. Asian stock markets climbed about 0.5%, with South Korean chipmaker SK Hynix soaring as much as 6.9%. The MSCI index hit record highs.
This is what irrational exuberance looks like when it's disguised as rational confidence.
The Trade War Whispering in the Background
Notice what didn't happen this week: there was no explosive trade war moment, no Twitter tantrum that sent markets into freefall. But the underlying anxiety is there. A meeting between Donald Trump and Xi Jinping eased fears about escalating U.S.-China tensions, and semiconductor stocks in China spearheaded the rally. That's investor-speak for "we're betting the trade war will stay cool."
The bet itself is reasonable. The confidence level underpinning that bet is not.
The Bull Market Turns Three
The market has now been in a bull run for three years, dating back to October 2022. Since bottoming in October 2022, the S&P 500 has gained 90%, an impressive run but not unusual by historical standards. We're at all-time highs. Valuations are at cycle highs. The labor market is weakening, inflation is sticky above the Fed's 2% target, and the government can't even keep its basic functions running for a month without political theater.
Yet somehow, the narrative is "healthy correction averted." Earnings growth will drive the next phase. Cyclicals will broaden leadership. The bull market will celebrate another anniversary.
Maybe. But markets don't usually run highest on the least amount of information. They run highest when confidence outruns reality. And right now, we have a government that can't report employment data, a Fed that's about to cut rates despite inflation being nowhere near its target, and investors treating a month-long shutdown as background noise while they chase record highs.
History doesn't repeat, but it rhymes. This particular rhyme sounds a lot like the part where people stop asking questions and start assuming the music won't stop.
What Actually Matters Now
Watch the Fed meeting next week. Watch whether PCE inflation—the statistic the Fed actually cares about—surprises in either direction. Watch whether the government shutdown extends past Thanksgiving and begins to actually damage economic activity. And watch those earnings conference calls for what management says about headcount, pricing power, and forward demand.
Because right now, markets are betting on a smooth landing with one hand while flying blind with the other. That's either genius or hubris, and we won't know which until we land.