Economic Update 11-17-2025

Economic data remained sparce last week, but as the federal government shutdown ended, coming weeks should see a more normal report flow.

Equities were mixed, with foreign stocks seeing gains, offset by declines in U.S. large cap growth and small cap. Bonds fell back as yields rose across the U.S. Treasury curve. Commodities gained, again led by precious metals, while oil was little-changed.

U.S. stocks were mixed on the week, with large cap indexes up slightly, while the Nasdaq and small cap groups fell back. Early Monday, stocks saw gains as hopes rose over the weekend for a short-term resolution to the government shutdown, which would offer a brief holiday respite. The bill was signed by late Wed., which funds the government through Jan. 30, and included controversial funding for SNAP food assistance programs. However, the longer-term issue of health care subsidies, which is the sticking point between the two parties, has yet to be addressed. Health insurance premiums are expected to soar again in 2026, continuing a pace that ramped up during the pandemic. By Thursday, the lack of available data and depth and length of the government shutdown weighed on investors, fearing additional weakness in the quarter. This was in addition to some diminished excitement for the buoyant 2025 theme of artificial intelligence, as valuations have continued to run on the higher side of consensus expectations for near-term revenues, albeit with still imperfect visibility on AI benefits flowing through to the economy, and impact on labor markets. Overall, we’ve seen a negative reversal for stocks referred to as ‘momentum,’ ‘high beta,’ and ‘low quality,’ which had rallied so sharply since April’s ‘Liberation Day.’ By contrast, stocks with higher-quality fundamentals have tended to lag in relative terms, which is the opposite of their stronger results over longer-term time periods.

By sector, health care and energy led with returns of several percent, followed by consumer staples and materials. Laggards were led by consumer discretionary (Tesla and Amazon) as well as utilities, industrials, and communications. Real estate also fell back as interest rates ticked higher.

Foreign stocks were the leaders for the week, with Europe and Japan up a percent or more, followed by lesser gains for emerging markets. Some industrial and labor releases in Europe and the U.K. came in a bit weaker than expected, which appeared to raise hopes for further central bank rate cuts. There also appeared to be positive sentiment around the U.S. government reopening—perhaps even more so than in the U.S. itself. Emerging market gains were centered in Brazil, India, and South Africa, the latter of which fared especially well as S&P upgraded their sovereign credit rating a bit from BB- to BB, noting a stronger growth and fiscal path.

Bonds fell back by a fraction of a percent in the U.S., along with higher yields along the U.S. Treasury curve; the one positive performer was floating rate bank loans. The rise in rates appeared to be aligned with falling expectations of a December FOMC rate cut, where odds have fallen from a near-certainty a few weeks ago to now around 50/50. Foreign bonds were mixed, with a slightly weaker U.S. dollar helping local emerging market debt outperform other groups.

Commodities saw gains in all groups, led by precious metals up by several percent, followed by energy. Crude oil rose just a fraction of a percent to $60/barrel. Natural gas, one of the most volatile commodity contracts, saw prices spike by nearly 10%, due to a early cold snap across the U.S. and expectations for a cooler winter associated with La Niña, as well as strong exports that have lowered domestic supply levels.

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.