Markets welcomed the resolution of the US government shutdown, though longer-term fiscal pressures and volatility within technology markets remained key concerns.
The 43-day US government shutdown finally ended after Congress passed, and President Trump signed, a funding package that keeps most federal agencies financed until 30 January 2026. It is the longest shutdown on record, eclipsing the 35-day impasse of 2018-2019. While the deal removes an immediate source of political and operational risk, it does little to improve the long-term fiscal picture. The legislation largely extends existing spending plans and leaves unresolved the dispute over enhanced Affordable Care Act subsidies, which are due to expire at the year-end. Against a backdrop of sizeable and rising US budget deficits and debt - the latter now close to the size of annual economic output - credit-rating agencies and the Congressional Budget Office continue to flag the federal finances as unsustainable without meaningful policy change.
Nonetheless, equity markets initially welcomed progress in Washington. The prospect of government workers returning to paid employment and the avoidance of a deeper hit to growth supported a relief rally, particularly in cyclical sectors. However, investors are now grappling with an unusually sparse flow of official data. During the shutdown, key agencies such as the Bureau of Labor Statistics and Bureau of Economic Analysis halted or delayed releases on employment, inflation and GDP, and some October reports may never appear. This makes it harder for the Federal Reserve to judge how far policy is restraining activity. Markets still expect a rate cut before the end of 2025, but the timing and scale of future cuts are increasingly contested as private indicators point to softer labour demand while inflation remains above target.
Within equities, the most turbulent trading was again concentrated in US technology and AI-exposed names. After sharp swings, the Nasdaq Composite finished the week down around 0.5%, even as it posted a late recovery on Friday from a steep decline the previous day. Concerns about stretched valuations, heavy capital expenditure on AI infrastructure and the risk of an eventual “air pocket” in demand remain a persistent theme in market commentary. For the T. Bailey funds, performance was supported by more diversified exposures. Healthcare and insurance-related thematic holdings, together with allocations to value-oriented global equity managers such as Ranmore and Havelock, provided positive contributions and helped dampen volatility relative to the broader technology-heavy indices. Overall, the TBAM funds experienced a constructive and comparatively steady week amid what remains a choppy market environment.
