Quick Takes
- At midnight on Wednesday, October 1, a partial US government shutdown became effective. However, investors largely yawned about it and the rally in stocks and bonds persisted unabated. Other than the US dollar and oil, most asset classes saw gains for the week.
- The S&P 500 Index made higher highs on each of the three days of the shutdown last week to end the week up +1.1% at another all-time high. It also marked its first close above the 6,700 milestone and has been positive for six consecutive days.
- International equities were also in rally mode as the MSCI EAFE Index (developed market non-U.S. stocks) rose +2.5% after slipping -0.4% the prior week. The MSCI Emerging Markets Index jumped +3.6% after falling -1.1% the previous week.
Source: Bloomberg. Data as of October 3, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.
Stocks, Bonds resume their rally after the prior week’s pause
Perhaps no news is good news? On Wednesday, a partial US government shutdown became effective, but investors largely yawned about it and resumed buying stocks and bonds. After all, the S&P 500 Index made higher highs on each of the three days of the shutdown last week to end the week up +1.1% at another all-time high. It also marked its first close above the 6,700 milestone. The benchmark US index has been positive for six consecutive days, showing that investors just aren’t bothered by the government shutdown. Even more impressive is that small capitalization stocks are showing similar momentum. The Russell 2000 Index, which finally marked a new all-time high the previous week, for the first time in more than four years, has also risen for six consecutive days and hit another record high to close the week up +1.7%. The tech-heavy Nasdaq Composite Index also rose for the week, up +1.3% but did slip on Friday, ending a five-day winning streak.
Several government releases of economic data went unreported, including weekly Unemployment Claims, the August Construction Spending report, and the August Factory Orders report. But perhaps the biggest casualty of the shutdown was the postponement of the much-anticipated September Employment Situation Report that includes nonfarm payrolls, the unemployment rate, and labor force participation. The US Senate was unable to pass a Continuing Resolution (CR) to fund government operations before the end of the fiscal year, initiating the shutdown at midnight on October 1. In the CR, the Republican majority sought a simple extension of fiscal year 2025 funding levels through November 21, whereas the minority Democrats also wanted to address the extension of expiring health care subsidies and other health-care-related matters. Republicans preferred to negotiate extending health care provisions later in the fall. Three Democratic senators broke with their caucus to vote for the CR, while one Republican voted against it, resulting in a 55-45 stalemate.
Of course, International equities were not directly impacted by the US government shutdown but were also in rally mode. The MSCI EAFE Index (developed market non-U.S. stocks) rose +2.5% after slipping -0.4% the prior week. The MSCI Emerging Markets Index jumped +3.6% after falling -1.1% the previous week. Non-US stocks were aided by the US Dollar Index’s resumption to the downside, as it slipped -0.4%, after two weeks of gains. WTI crude oil dropped more than -7% after the OPEC+ group of major oil producing nations signaled that it would boost production in November.
U.S. Treasuries also generated positive returns, as yields decreased along the yield curve. In the absence of the Bureau of Labor Statistics September employment report, markets focused on alternative labor market indicators like the September ADP private employment report, which showed the economy losing -32,000 jobs. Wall Street expectations were for ADP to report +51,000 jobs added, so the surprise weakness seemed to increase market conviction in Fed Rate cut expectations. The 10-year yield ended the week down -6 basis points (bps) at 4.12% after rising +5 bps the prior week. The 2-year Treasury yield fell -7 bps to 3.58%, offsetting the prior week’s +7bps rise. The Bloomberg U.S. Aggregate Bond Index returned +0.5% for the week following a -0.3% drop the prior week. The Bloomberg Global Aggregate ex U.S. Bond Index (non-U.S. bonds) returned +0.7% after a -0.8% drop the prior week.
Chart of the Week
The Conference Board’s Consumer Confidence Index fell to 94.2 in September from an upwardly revised 97.8 in August (originally 97.4). That was above Wall Street expectations for an increase to 96.0. In the same period a year ago, the index stood at 99.2. The Present Situation gauge fell to 125.4 from 132.4 the prior month after it was revised higher from the originally reported 131.2. The Expectations gauge — which reflects consumers’ six-month outlook — declined to 73.4 from 74.7 the prior month (revised a tick lower from to 74.8). Sustained levels below 80 on the expectations index can signal a recession within the next year, while in good times, the index can top 120 or more. Responses showed that consumers expected higher stock prices and easing inflation. The key takeaway from the report is that consumers felt much less positive about business conditions, with thoughts about job availability hitting multi-year lows.
Consumer Confidence Falls Further in September
The Conference Board’s Consumer Confidence Index
Source: Conference Board, Briefing.com.
The Week Ahead
This week’s economic calendar is extremely light and, with the government shutdown, may be even lighter than the scheduled releases indicate. The Federal Open Market Committee (FOMC) is slated to release the minutes from its mid-September meeting on Wednesday, while the University of Michigan releases its Consumer Sentiment survey on Friday.
The third-quarter earnings season kicks off on October 14, with several of the big banks reporting results, but a few reports come before that. Constellation Brands announces earnings on Monday, followed by McCormick on Tuesday. Delta Air Lines and PepsiCo release their results on Thursday.
Did You Know?
MARKETS ON REPEAT – The performance of the S&P 500 in the first few months of the first and second Trump presidencies couldn’t have looked more different, but by late September (9/25) — 172 trading days into Trump’s second term — the S&P 500 was up +10%, the exact same amount as it was in the first 172 trading days of his first term. (Source: Bespoke)
STUDENT LOAN PAYMENTS STALL – 29% of federal student loan borrowers (5.4 million people) were at least 90 days past due (90+DPD) as of July. That marked the fifth straight month where more than 5 million federal student loan borrowers were 90+DPD and pushed more borrowers closer to default status (270+DPD). (Source: TransUnion)
PUNTING ON PUNTS – Through the first three weeks of the NFL season, teams punted an average of 3.65 times per game, which is the lowest average per game total since at least 1940. Factors behind the decline include a higher frequency of going for it on fourth down and field goal kickers becoming more accurate from longer ranges. (Source: The Wall Street Journal)
This Week in History
FEDERAL INCOME TAX IMPOSED – On October 3, 1913, President Woodrow Wilson enshrined into law a federal income tax, less than 20 years after it was declared unconstitutional by the U.S. Supreme Court. He signed the act after 9 p.m. to prevent anyone from hiding assets during that day’s business hours. The tax kicked in at 1% of all earned income over $2,500 for single taxpayers and $3,333.35 for married couples. (Source: The Wall Street Journal)
Economic Review
- Due to the current partial US government shutdown, the release of the following reports has been delayed or postponed:
- Weekly Initial Jobless Claims and Continuing Claims
- August Construction Spending
- August Factory, Durable Goods, and Capital Goods Orders
- September Employment Situation Report (Nonfarm Payrolls, Unemployment Rate…)
- The Institute for Supply Management’s (ISM) Manufacturing PMI improved to 49.1% in September from an unrevised 48.7% the prior month. That just beat Wall Street consensus expectations for it to rise to 49.0% but marks the seventh consecutive month the Manufacturing PMI has been below the 50.0% dividing line between economic expansion (above 50%) and contraction (below 50%). Despite the overall improvement, the index of New Orders, a sign of future demand, fell to 48.9% from 51.4% the prior month, which was the first positive reading in seven readings. The New Export Orders index slumped even more to 43.0% from 47.6%. However, Employment rose to 45.3% from 43.8% but remains in contraction for eight months now. The Production barometer rose out of contraction territory, to 51.0% from 47.8%. The Prices index, a measure of inflation, declined to 61.9% from 63.7%, its lowest level since January.
- The ISM Services PMI reversed to 50.0% from 52.0%, missing expectations for a dip to 51.7%. Service-oriented companies, such as restaurants and retailers, employ the majority of Americans. The New Orders component sank to 50.4% following the prior month’s surge to 56.0%. The Production component also saw a large drop, to 49.9% from +55.0% the prior month. The Inventories and Imports components both dropped -5.4 points back into contraction territory. The Backlog of Orders jumped +6.9 points to 47.3% and the Employment component improved to 47.2% from 46.5%. The Prices index was up marginally to 69.4% from 69.2%. Overall, the report showed a broad slowdown in growth for the key service sector portion of the US economy, but at least inflation was little changed.
- Unlike the competing ISM Manufacturing PMI, the S&P Global U.S. Manufacturing PMI remains in expansion territory, although it slipped to 52.0 in September from 53.0 the prior month. That was in line with the flash reading two weeks prior, as expected. After the prior month’s surge in Production, it moderated in September. Although up for a ninth successive month, New Orders rose only modestly and at a pace below the survey average. Exports were a source of demand weakness, falling overall for a third month in a row. Tariffs were reported to have weighed on Exports, especially to Canada and Mexico. A positive Outlook helped encourage manufacturers to take on additional staff, with several anticipating an increase in sales over the next 12 months. Selling Prices fell to the lowest level since January. Input Prices weakened since August, but it remains elevated in the context of the survey history.
- The S&P Global U.S. Services PMI continued to expand in September, but at 54.2 it has now slipped for two successive months since July’s seven-month high of 55.7. Still, that was up from the 53.9 preliminary reading where it was expected to stay. The index has now signaled continuous service sector expansion for 32 months. Furthermore, over the third quarter, average monthly growth was the best recorded over a calendar quarter in 2025 so far. There was a marginal overall increase in Employment, but slightly softer rates of demand and activity growth led to some reluctance amongst US service companies to add to their staffing levels. Business Confidence also improved in September, strengthening to its highest since May. There remains some uncertainty in the Outlook, especially around tariffs; lower interest rates in some instances were reported to have boosted optimism. Tariffs remained a key source of Input Cost pressures in September, which overall rose sharply and to a slightly faster degree than the previous month. Selling Prices increased to the slowest degree since April (albeit also still higher than the historical rate).
- The Job Openings Labor Turnover Survey (JOLTS) showed that Job Openings were little changed in August. According to Bureau of Labor Statistics data, job openings increased slightly to 7.227 million from 7.208 million in July (revised up from 7.181 million). The median estimate in a Bloomberg survey of economists called for 7.200 million openings. The ratio of Job Openings to Unemployed Workers was 0.98, down from 0.99 the prior month and down from a peak of 2.0 in July 2022, which is the prepandemic level the Fed wants to see it at. The Number of People Quitting Jobs was 3.142 million, down from 3.270 million the prior month. The record was 4.5 million job quitters in late 2021. The Hiring Rate ticked down to 3.2% from 3.3%, the lowest level since June 2024. The hiring rate typically ranges from 3.7% to 4.0% in a strong economy. The Quits Rate ticked down to 1.9% from 2.0% the prior month (unrevised). People tend to quit less often when the economy softens and jobs become harder to find. The Layoffs Rate was unchanged at 1.1%, below the 1.4% annual average from 2010 to 2019. The silver lining in the report is that most companies aren’t resorting to mass layoffs or even cutting many jobs.
- The Texas Manufacturing Outlook Survey fell in September as the General Business Activity came in at -8.7, down from an unrevised -1.8 the prior month, and well below the expected decline of -1.0. The Production index, a key measure of state manufacturing conditions, declined to +5.2, still in expansion territory but down from +15.3 the prior month. New Orders and Shipments both declined by roughly -8 points. Labor market measures weakened, with Employment and Hours Worked both down double digits, though they are still at expansion levels. Both Prices Paid and Prices Received declined moderately. The Company Outlook index improved. Indicators of conditions Six Months Ahead mostly weakened but still are mostly positive. The Texas Service Sector Outlook Survey contracted for the month, falling to -5.6 from +6.8 the prior month (unrevised).
- The Chicago Purchasing Managers Index (PMI), a barometer for the Chicago region’s business and manufacturing conditions (also known as the Chicago Business Barometer), fell to 40.6 in September from an unrevised 41.5 the prior month. That was well below Wall Street expectations for a 43.3 reading. Readings below the 50 level indicate contraction and it has been in contraction territory for 22 consecutive months now. The decline was driven by another sharp drop in New Orders, alongside falls in Supplier Deliveries and Employment, but were partially offset by rises in Production and Order Backlogs. Prices Paid declined -0.4 points after two months of -8.3 point drops
- The National Association of Realtors (NAR) reported that Pending Home Sales jumped +4.0% in August after the prior month’s -0.3% rise (revised higher from -0.4%). That was far above Wall Street expectations for a +0.4% increase. Year-over-year sales were up +0.5%, better than expectations for a flat annual rate and unchanged from the prior month’s annual rate after being revised higher from +0.3%. From a regional perspective, the Midwest popped +12.5 percentage points to +8.7, the West was up +5.0% from +4.1% the prior month, the South was up +3.1% after being flat the prior month, and the Northeast slipped -0.6 percentage points to -1.1%. The key takeaway is that consistent with New Home Sales reported last week, Pending Homes Sales also show lower mortgage rates are enticing buyers back into the market.
- According to the S&P Cotality Case-Shiller 20-City Home Price Index, U.S. housing prices declined -0.07% in July, an improvement from -0.21% in June (after being revised higher from -0.25%). That was better than expectations for a -0.20% dip. It was the fifth consecutive monthly decline, the longest slide since 2022 and second longest in 13 years. Of the 20 cities tracked by the index, 15 fell over the month with San Francisco being the weakest (-0.92%) while Cleveland the strongest-performing market (-0.93%). On a year-over-year (YoY) basis, the 20-city index was up +1.82%, beating expectations of +1.55% but down from +2.16% annual increase the month before (revised higher from +2.14%). Seven of the 20 cities fell over the year with Tampa being the weakest-performing market (-2.81%) while New York was the strongest (+6.43%). U.S. home values have essentially stagnated after inflation, marking the third straight month of real housing wealth decline for homeowners.
- The competing Federal Housing Finance Agency (FHFA) House Price Index (HPI) showed U.S. home prices slipped -0.1% in July, up from -0.2% the prior month (unrevised). The results were a tick better than Wall Street expectations of -0.2%. The government data showed home prices up +2.3% year-over-year, down from +2.7% the prior month. House prices were up in all nine regions on an annual basis but mixed for the month-over-month comparison.
- Weekly MBA Mortgage Applications slumped -12.7% for the week ending September 26, after inching up +0.6% the prior week. The Purchase Index was down -1.0% after gaining +0.3% the prior week. The Refinance Index sank -20.6% after inching up +0.8% the prior week but rocketed up +57.7% two weeks prior. The average 30-Year Mortgage Rate increased to 6.46% from 6.34% the prior week, the first increase in 5 weeks.
Asset Class Performance
Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.