By: John Kicklighter, Head of Market Research
With market sentiment seemingly already blind to tariff, growth and monetary policy uncertainties; perhaps it wasn’t surprising to see the US government shutdown shrugged off.
Talking Points:
The dichotomy of the markets continues to build. On the one hand, the list of fundamental uncertainties and uninspiring growth trends continues to grow. On the other, benchmarks of speculative appetite like the major global indices are forging fresh record highs. The temptation is to fall into one of the two extreme camps, that either fundamentals don’t matter or markets ‘must’ be on the verge of speculative collapse owing to their drive to extremes. This is just another attempt at timing the market, just on a fundamental/speculative spectrum rather than along a pure price or economic line. Timing markets is a fraught an inherently low probability business, but it is still worth monitoring the most likely triggers for a shift in sentiment and markets that are more capable to lead the charge.
Chart of US Google Search Trends ‘Government Shutdown’ and Other Key Economic Topics
Source: Google Trends
While concern over trade wars, uneven monetary policies, slowing growth and persistent inflation remain; the most pressing issue of the moment – with imminent potential and a complex web of influence – is the US government shutdown. This is not a matter that we can necessarily follow on the economic calendar or a definitive date for resolution or deterioration. Every day that passes without Congress resolving its impasse, the weight of economic impact and international questions over sovereign credibility grows. Meanwhile, measures of sentiment from consumers, businesses and other key economic participants will fill in the void for absent official statistical series and dismissed extreme and accusatory political commentary.
Calendar of Top Global Macro Event Risk
Source: John Kicklighter
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For insight on the government shutdown, it is perhaps better to look to the markets themselves rather than scheduled event risk or even monitoring headlines with bated breath. The congestion of the dollar this past week following a broader 2025 bear trend seems to reflect hesitancy on a depth of concern. On the other hand, gold’s charged rally to fresh record highs seems to speak to a potent demand for an anti-fiat. Considering the Greenback is the most heavily used currency in the world, for both transactions and reserves, and other benchmark economies face fundamental risks of their own; a shift away from currency altogether is perhaps not so surprising.
The drive in equities is another contradictory extreme that speaks to the detachment of speculation that can swell in periods of unsettling pause. More interesting is the measure of underlying exposure in the markets towards speculative reach and away from hedging risk. Long-oriented options volume in equities has surged to record highs nearly 50 percent higher than the meme-stock peak in 2021. Meanwhile evidence of hedging efforts through basic volatility measures has bottomed out across many major asset classes. Not only is the VIX very low, but implied volatility measures for Treasuries, crypto, gold, crude oil and emerging markets is also set remarkably low.
Chart of Market Volatility Measures (Daily)
Source: TradingView
On the purely data front, there is not a lot of high-level event risk that can reasonably be expected to move the needle on the larger fundamental themes – in large part because most of those themes have seen a significant moderation in their broader market-moving influence. With the debate over the Federal Reserve’s monetary policy course inflamed by President Trump’s frequent criticisms and efforts to replace board members, the dual mandate remains a possible flashpoint. That said, the labor component of that balance has been sidelined by the delay of the September labor data (including change in nonfarm payrolls), and puts increased emphasis on the inflation element.
Depending on how long the shutdown persists, the market’s favorite CPI update may itself be delayed. That consideration will probably amplify alternative inflation readings that are more timely. That said, the New York Federal Reserve’s US consumer inflation expectations report on Tuesday would offer some critical feedback. It’s also worth noting that the data will be surrounded by an economic sentiment survey (RCM/TIPP) as well as a Logistics Managers Index (LMI) and Supply Chain Pressure Index (NY Fed).
US Consumer Inflation Expectations 1-Year - New York Federal Reserve
Source: NY Fed
Arguably, the most insightful event on schedule through the coming week is the University of Michigan’s preliminary October reading of consumer confidence. In a world where standard data series – like jobs or inflation – are being assailed for their reliability, sentiment surveys reflect a mood. Now that may seem squishy economics, but the disposition of the world’s largest collective GDP force can materially alter the course of the growth or the priority of the prevailing fundamental theme.
Further, beyond the recognition that the sentiment survey has a meaningful alignment to US economic activity, it also offers up insightful component measures that can speak to a range of immediate concerns such as inflation forecasts, employment expectations and the impact that government uncertainty is having in a more tangible measurement. With all that said, the headline sentiment reading from the UofM’s last update was near the lowest levels of the series’ more than 70-year history; which is not a good staging point for a month that seems to have grown even more fraught.
Chart of US Consumer Confidence Overlaid with US GDP and NBER Recessions
Source: TradingView, University of Michigan
What are the major events and indicators on tap for the global economy that could charge volatility in markets and reshape deeper fundamental themes? Sign up for the updated Global Macro Calendar updated each week with a two week look ahead of the top events!
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--- Written by John Kicklighter, Global Head of Content
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