Economic Update 11-10-2025

Economic data was again limited due to the federal government shutdown, but included improvements in ISM services and ADP employment, while ISM manufacturing and consumer sentiment fell back to varying degrees.

Equities were largely down around the world, led by a pullback in the technology group. Bonds were flat with little change in Treasury yields. Commodities were also relatively flattish for the week, and oil fell slightly.

U.S. stocks experienced on off-week, as technology experienced the bulk of the declines, down around -4% (led by down Nvidia, Microsoft, and Salesforce), followed by communications. On the positive side, gains were seen in energy, health care, and financials.

Sentiment turned against technology last week, with signs of skepticism about AI-related company valuations and massive capital spending on those expensive endeavors. While it was one of the biggest pullbacks since April for growth stocks, such retrenchments are far from unusual after strong upward movements in short periods of time. Mid-week, the mood was buoyed a bit by early signs that some U.S. Supreme Court members were skeptical that the administration has the authority to impose tariffs under emergency powers, through IEEPA. This reduces the chances a bit that they’re upheld (a final decision is expected toward year-end or in Jan. 2026). However, the court case is largely based on the status of tariffs as an ‘emergency,’ so even if the tariffs are blocked by the court ultimately, it’s likely other (non-emergency) means would be used in attempts to re-apply them, perhaps ending up with no net change to the outcome. The government shutdown, now into its second month, is assumed to likely trim about a percent off of U.S. GDP for the fourth quarter, with the additional negative news from the FAA that flight traffic would be reduced, which has already begun to negatively affect traveler sentiment. However, missing growth from the shutdown could be made up in first quarter 2026, as postponed payrolls and spending are restarted. Signs of perhaps even weaker labor conditions weighed on sentiment as well.

Foreign stocks were mixed, with flattish results in the U.K., and negative returns in Japan and Europe, and more notably in emerging markets. The Bank of England met, and decided to keep the bank rate at 4%, with a close 5-4 vote, with a minority wanting to cut, but the deciding members wanting more information to ensure inflation was moving in a downward trajectory, and the communication was taken as dovish. In EM, gains in Brazil of several percent offset sharp declines in Taiwan and South Korea—each of which has been closely correlated to the U.S. technology and communications sectors.

Bonds were very flat on the week overall, with minimal change in the U.S. Treasury yield curve. Floating rate bank loans outperformed investment-grade and high yield corporates by a few basis points. Foreign bonds experienced a bit more variation, with emerging market local currency bonds outperforming, as the U.S. dollar fell slightly.

Commodities were flattish on the week, with a small gain in precious metals offset by a decline of over a percent in industrial metals. Crude oil fell about -2% last week to just under $60/barrel, with no major headline news to report, but higher supplies continuing to weigh on prices.

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.