After 43 days, Congress voted to end the longest shutdown in US government history. The end provided a short-lived rally in equity markets; while fixed income market participants, seeking economic clarity, continue to be frustrated by both the lingering effects of the shutdown and this week’s hawkish comments from Fed policy makers. The Bureau of Labor Statistics (BLS) and other statistical agencies are working to restart operations, clear reporting backlogs, and re-establish regular publication calendars, however the October employment and Consumer Price Index (CPI) reports may never be released due to the government shutdown.
The lack of government provided economic data this week, such as the CPI and Retail Sales, did not prevent Fed officials from commenting on the state of the economy and the possible direction of Fed policy. Federal Reserve Bank of Boston President Susan Collins, a voting member of the FOMC, stated that she would be hesitant to ease policy further citing the lack of information regarding an apparently weakening labor market and antiquated inflation data. Nevertheless, the limited employment data available to the Fed continues to reflect a weakening jobs market. A report last week from global outplacement firm Challenger, Gray & Christmas reflected planned layoffs soared to more than 150,000 in October, the highest reading for that month since 2003.
Uncertainty regarding the economic outlook is complicating both short and long-term market expectations for interest-rate cuts at the December FOMC meeting and into next year. Markets are currently pricing in less than a 50% chance of a 25-basis point rate reduction next month following the hawkish commentary of members of the Fed this week. A month ago, the market was pricing in a 95% or higher chance of a rate cut. As such, bond yields moved higher this week, the 10-year Treasury is currently trading near 4.12% and the 2-year around 3.60%.
In the current economic environment Chandler remains positioned with a slightly longer duration relative to benchmarks. We continue to expect monetary policy to become more accommodative over the next six months.
Next week (US Government data may be delayed by shutdown): Empire Manufacturing, ADP Weekly Employment Preliminary Estimate, Import/Export Price Index, Industrial Production, Capacity Utilization, Housing Starts, Building Permits, FOMC Meeting Minutes, Initial and Continuing Jobless Claims, Leading Index (LEI), Existing Home Sales, S&P Global US Manufacturing PMI, S&P Global US Services PMI, U of M Sentiment.
© 2025 Chandler Asset Management, Inc. An SEC Registered Investment Adviser. Data source: Bloomberg, Federal Reserve, and ADP. This report is provided for informational purposes only and should not be construed as specific investment or legal advice. The information contained herein was obtained from sources believed to be reliable as of the date of publication, but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as an indicator of future results. Past performance is not indicative of future results. This report is not intended to constitute an offer, solicitation, recommendation, or advice regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest rate, credit, and market risk. Interest rate risk: The value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low-rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market, in general, could decline due to economic conditions, especially during periods of rising interest rates.