Schwab IMPACT 2025: Case for Government Shutdown Ending Soon, "No More Cuts" from FOMC

Economic Outlook - The current environment has led to questions regarding the direction of interest rates, with expectations that there will be no more rate cuts this year due to concerns about inflation [2][3] - Bond yields, particularly the 10-year yield, have been fluctuating, with recent observations showing it dropping below 4% and rising to 4.14% [4] Government Shutdown - The government shutdown has reached day 37, causing significant pressure on federal workers and impacting food stamp benefits [6][7] - Airline travel is highlighted as a critical pressure point, with a 10% reduction in flights announced at 40 airports, which may prompt a resolution to the shutdown [8][9] Fixed Income Investment Strategy - The recommendation for fixed income investing is to focus on higher credit quality and intermediate-term duration, as the current environment does not provide sufficient yield for taking on credit risk [12][13] - The preference is for investment-grade securities over high-yield or leveraged loans due to concerns about widening credit spreads [13][14] Economic Disparities - The economy is described as two-tiered, with wealthier individuals driving consumption while lower-income groups face increasing financial stress, evidenced by rising delinquencies on loans [20][21] Tariff Policy - The Supreme Court is considering the constitutionality of the president's tariff policy, with potential implications for companies and the economy if tariffs are overturned [22][24] - A decision from the Supreme Court is anticipated as early as December, which could lead to significant financial refunds for companies [23][24]