Markets look to finish the week flat to slightly down amongst increased volatility. Driving markets this week was the re-opening of the government which pushed investors to dive back in despite ongoing uncertainty around economic data. What we are seeing is a rotation out of high-flying tech companies into sectors that have been ignored for much of the year. With Q3 earnings season all but finished, generally markets turn to the economic data, which is not forthcoming, i.e. October CPI & PPI and the Retail Sales report not to mention weekly jobless claims. This could create increased volatility (as we saw this week) as rumors, negative headlines, and herd mentality fill the vacuum.
Given the negative vibe right now, you may not have noticed the Dow Jones Industrial Average (DJIA) notched its second consecutive record close on Wednesday. The DJIA index has lagged the tech heavy Nasdaq most of the year. And while it remains solidly in last place amongst the major indices, it is beginning to make up ground as valuations, particularly among those tech companies involved in artificial intelligence, come under increased scrutiny and pressure.
The good news is that the government shutdown, the longest in history, is now over. The House passed a bill Wednesday evening to fund the government through January 30, 2026, and President Trump signed it. The deal came together after eight Democratic senators broke ranks, allowing Republicans to pass a funding bill without extending the enhanced healthcare subsidies. The economic impact while the government was shut down is estimated to be in the billions. However, as furloughed workers receive backpay, it is typically the case that any harm that may have been caused by the shutdown is quickly reversed. Before you rejoice, note that we will likely be back in the same position come the end of January when funding once again runs out. With the extended ACA subsidy unlikely to pass at the promised mid-December vote, we can expect it will again be the catalyst for another shutdown.
In other news, an interesting idea is being floated by President Trump. This week he put forth a proposal to lengthen mortgage terms to 50 years. On the surface this may sound like one way to break the logjam that is the housing market. Some economists believe this could drive home prices higher with only a minimal impact on the monthly mortgage payment. The argument against it is that it will add substantially to the interest paid on said mortgage over the life of the loan. However, a second proposal is more interesting and perhaps the innovation we need. He has also proposed making mortgages portable, meaning you can take your interest rate with you as you sell your home and buy another. For many homeowners who have locked in historically low interest rates, this could be the mechanism allowing them to sell, particularly among retirees and empty nesters living in large homes. The devil is in the details and undoubtedly if this comes to fruition, it will take a lot of time to implement and come with considerable oversight and regulation.
In closing I turn to those amongst us that love carbs. You know who you are. I think we’ve all grown a little weary of the constant and never-ending talk about tariffs. However, this is one thing you may want to pay attention to. After an antidumping investigation, the current administration said it would slap an unusually large 92% duty on pasta made in Italy starting in January. Combined with President Trump’s 15% tariff on EU goods, that amounts to a 107% import tax on Italian pasta. Not to fear, this impacts pasta originating from Italy which makes up only 12% of the U.S. pasta market. It looks like made in America wins again. Now you know.
Bruce J. Mason, MBA
