The U.S. government is approaching its longest shutdown in history, with Republicans and Democrats still at loggerheads over the national budget. While the impasse shows no immediate signs of easing, investors and policymakers are flying blind without federal data to help their view of the health of the economy.
The Federal Reserve has held a rate meeting without key data on its mission: full employment and stable inflation. Investors are also heading into another month without major barometers and may turn to private investigations for clues.
Analysts warned on Monday that these private investigations, while useful in an information vacuum, should not be given too much weight. For example, the U.S. ISM manufacturing sentiment survey will be released on Monday, and the next ADP employment review is also expected later this week.
“The danger with these data is that in the absence of appropriate economic data, their information will be given unwarranted credibility,” UBS chief economist Paul Donovan said in a note to clients on Monday. “Falling survey response rates and rising political polarization combine to reduce the reliability of survey-based evidence.
“Unfortunately, the frequency of surveys already means they get more attention than they deserve. Frequency bias means we automatically focus on less important things that come before us all the time. Remove other U.S. data sources and it’s easy to say, ‘Well, we’re going to use this inaccurate number because there’s no accurate number available.'”
Deutsche Bank’s Jim Reid echoed Donovan’s sentiments, writing in a note wealth Monday: “Were it not for the government shutdown, we would have been looking at the U.S. October jobs report on Friday. But given that we don’t have a government data release, ADP’s private payrolls report on Wednesday may get undue attention, especially given Chairman Powell’s hawkish press conference last week.”
At last week’s Fed meeting, Powell delivered a much-anticipated quarter-point rate cut, but failed to confirm Wall Street’s long-held expectation that the final cut in 2025 would come in December. Instead, the Fed chair stuck to his wait-and-see rhetoric, which is arguably more appropriate now than ever in the absence of key indicators to help chart the best course for monetary policy.
Regarding the ADP data, Deutsche Bank said it expected to add 50,000 jobs, compared with -32,000 previously, and the consensus was for +30,000 jobs.
Reed added that Deutsche Bank economists “believe the rebound in the ADP survey will be consistent with the seasonal pattern observed in the summer and autumn in recent years.” “These seasonal factors may have artificially weakened the overall recent data, although tight immigration restrictions and suppression of hiring and firings suggest that the labor market is in a fragile low-level equilibrium that won’t require much effort either way to change momentum.”
While potentially volatile data could cause market volatility later this week, ignorance seems to be bliss for now. In the United States, the S&P 500 and Dow Chemical Jones was flat ahead of today’s open, even as the VIX rose 5%, signaling a bumpy few days ahead.
In Europe, Germany’s DAX index rose 0.85%, London’s FTSE 100 index was flat, and the European STOXX 50 index rose 0.54%. Things were equally positive in Asia: the Shanghai Stock Exchange was up 0.55% and Hong Kong’s Hang Seng Index was up 0.97%.
Here’s a snapshot of the market ahead of the opening bell in New York this morning:
- S&P 500 Index Futures rose 0.59%.
- Stoxx Europe 600 Index up 0.37%.
- UK FTSE 100 Index Very flat.
- China CSI 300 up 0.27%.
- Indian NIFTY 50 up 0.16%.
- Bitcoin It fell to $107,000.