On Sunday, a group of eight Senate Democrats broke with their party to vote with Republicans to advance a bill to reopen the government. The bill would provide full-year funding for some departments, fund other agencies through January 30, and provide pay for furloughed government workers. The bill will also resume withheld federal payments to states and localities and recall agency employees who were laid off during the shutdown.US MBA mortgage applications rose +0.6% in the week ended November 7, with the ...

Core Viewpoint - The government shutdown has caused economic disruptions, but the reopening is expected to restore confidence and provide necessary data for policy-making [2][5][6]. Economic Impact - The current quarter's GDP growth is anticipated to be lower than previously expected due to the shutdown, but the overall economy remains robust with a growth rate of over 4% in the second and third quarters [2][4]. - The reopening of the government is expected to improve consumer confidence, which has plummeted due to the shutdown [5]. Future Outlook - There is optimism for strong real GDP growth in 2026, despite the recent shutdown, as the economic fundamentals remain strong [6]. - The expectation is that there will not be another shutdown in January, as parts of the government will be funded for the full fiscal year [7][8]. Fiscal Policy and Spending - The recent federal spending trends show a decrease, with a 74% reduction in last year's fiscal deficit attributed to the Biden administration [10]. - Lower interest rates are seen as crucial for increasing affordability in sectors like home buying, with mortgage rates currently at 52-week lows [10].

Art Market Rebound - The art market is expected to rebound with high-profile pieces going to auction, potentially marking the first increase in over three years [1][2] - Expected art sales next week are valued at over $14 billion [1] - This represents a 58% increase compared to the previous year [2] Factors Influencing Demand - Rising stock prices, growing wealth creation, and falling interest rates are expected to boost demand in the art market [2] - Auction houses are experiencing record demand levels, including bidders per lot and sell-through rates [3] - Supply is catching up with demand, indicating a shift in the market over the last two months [3] Key Collections and Artists - Major collections from Cindy and Jay Pritsker and Leonard Lauder are coming up for sale [4] - These collections include three Gustav Klimt paintings, with one portrait potentially selling for over $150 million [5] - Other notable pieces include a Monet water lily (potential sale over $40 million) and a Rothko called Yellow Stripe (potential sale over $50 million) [5] - Mauricio Catalan's America, a solid gold toilet, is generating significant interest, with the gold itself worth around $13 million [6] Challenges and Competition - Increased interest rates have raised the opportunity cost of owning art [7] - Demographic shifts, such as aging baby boomers, are impacting the collector base [7] - Alternative investments like private credit and sports valuations are providing competition for art [8] - Luxury collectibles like sneakers and handbags are attracting younger collectors [10]

Market Outlook - The market is not in a traditional bubble, as people tend to expect history to repeat itself, but the market often has different plans [3] - The greatest call was the secular decline in interest rates, which is believed to be back [4] - Short-term interest rates would be between 1% and 2% without the Fed's intervention [3] Economic Factors - Demographics are a strong reason for the current yield curve, as aging societies save more [7] - Older populations save more, exemplified by Japan and Germany, where savings exceed investment [8][9] - The US has $170 trillion in financial assets against a $30 trillion economy, making it difficult to sustain high interest rates [10] - Private debt is contracting at 2% per year relative to GDP, impacting the banking system [14] Investment Strategy - A massive shift in corporate sector ownership from debt holders to shareholders is expected as debt decreases [14][15] - Equities are expected to benefit as debt stock unwinds [16] - Productivity gains from AI are already visible, with hours worked down about 2% from 2019 while real GDP is up 13% [17] Technology Sector - The corporate sector is generating free cash flow late in the cycle [17] - Hyperscalers may not make money directly from large language models but will offer low-cost software packages [22]

Core Viewpoint - The widespread adoption of stablecoins may necessitate the Federal Reserve to maintain lower short-term interest rates than previously anticipated [1] Group 1 - Federal Reserve Governor Stephen Miran highlighted the potential impact of stablecoins on monetary policy [1]

Core Insights - The current state of mergers and acquisitions (M&A) is experiencing a 9% drop in activity during the first half of the year, attributed to market uncertainties, including tariffs and interest rates [2] Group 1: M&A Activity and Market Conditions - Dr. Obonyo highlighted that uncertainties in the market, particularly regarding tariffs, are causing hesitation among companies to commit significant capital for M&A [2] - Key considerations for M&A include identifying the right target, ensuring the right price, and planning for post-merger integration [2] - Mark Henkels noted that higher interest rates are influencing deal activity in the industrial sector, leading to more creative deal structuring beyond all-cash transactions [2] Group 2: Strategic Priorities in the Industrial Sector - The focus in the industrial sector has shifted from pure growth to simplification and allowing investors to decide on diversification [2] - "Through-cycle" performance has become a key theme in industrial boardrooms, emphasizing the need for growth that can withstand uncertainty [2]

Core Argument - The Supreme Court's skepticism regarding the president's legal authority to impose tariffs under emergency economic powers raises concerns about the future of these tariffs and their impact on the economy [1][2][4]. Tariffs and Economic Policy - The administration believes it has made a compelling case for the president's authority to declare emergencies related to foreign policy and impose tariffs as a response to trade deficits and national security issues [2][4]. - Tariffs are viewed as a key tool for addressing economic emergencies, with the International Economic Emergency Powers Act (IEEPA) granting the president the authority to regulate imports, potentially including embargoes [6][7]. - The current tariff policy is integral to the administration's economic agenda, aimed at re-industrializing the U.S. economy and reducing trade deficits [8][13]. Economic Impact of Tariff Reversal - A ruling against the administration could lead to significant economic pain, including increased uncertainty and a drag on economic growth, as highlighted by Federal Reserve officials [9][10]. - The administration has collected nearly $200 billion in tariff revenue as of September 30, which underscores the financial implications of these tariffs [10]. - Financial markets have reacted positively to the current tariff policies, and any reversal could damage market confidence and economic stability [12][13]. Contingency Plans - The administration is prepared with contingency plans to enact tariffs through other legal avenues if the Supreme Court rules against them [15][16]. - Various sections of trade law, such as Section 232, could be utilized to impose additional tariffs if necessary [15]. Government Shutdown and Economic Consequences - The ongoing government shutdown, now the longest on record, poses risks to economic stability, with estimates suggesting a loss of up to $15 billion per week, potentially impacting GDP growth [20][21]. - The shutdown has already affected military payments and essential benefits, leading to broader economic implications if it continues [17][21]. - The administration emphasizes the need for bipartisan cooperation to resolve the shutdown and prevent further economic damage [22].

Group 1: Layoffs and Job Market - Over 1 million people have been laid off in the US this year, marking a 65% increase compared to the same period in 2024 and 44% more than the total job cuts announced in all of last year [1] - In October, US employers cut more than 150,000 jobs, the largest reduction for the month in over 20 years, driven by technology and warehousing sectors [3][31] - The rise in layoffs is attributed to the adoption of artificial intelligence, slower consumer spending, and hiring freezes [7][85] Group 2: Market Reactions and Stock Performance - The stock market has reacted negatively to the surge in layoffs, with major indices like the Nasdaq falling by 1.9% and the S&P 500 down by 1.2% [5][17] - Concerns over the valuation of tech stocks have led to significant sell-offs, with over $420 billion wiped off the value of the largest seven US tech companies [6] - Notable declines in tech stocks include AMD down 7.1%, Intel down 3.8%, and Nvidia down 3.3% [4][5] Group 3: Economic Indicators and Predictions - The current job cuts are the highest since 2020, indicating a potential downturn in the economy [6] - The Bank of England has maintained interest rates at 4%, with expectations of potential cuts in the future depending on inflation trends [12][73] - Economic forecasts suggest that the unemployment rate in the UK could rise to 5.1% by spring next year, higher than previous predictions [70]

Group 1 - Gold prices have steadied as traders assess comments from Federal Reserve officials and data indicating a significant weakening in the US jobs market, which raises the possibility of lower interest rates [1][3] - US companies have reported the highest number of job cuts for any October in over 20 years, according to Challenger, Gray & Christmas Inc, contributing to a weaker dollar [2][4] - The current economic conditions are difficult to evaluate due to the longest government shutdown in US history, which has delayed key official data [4] Group 2 - Gold is on track for its best annual performance since 1979, with prices supported by US rate cuts, inflows into bullion-backed ETFs, and increased central bank purchases [5] - Economists at Macquarie Group predict a decline in gold prices over the coming year after a 50% year-to-date rally, citing factors such as rebounding global growth and easing tensions between the US and China [6] - Macquarie suggests that any decline in gold prices will be slower than previous peaks, with prices expected to remain above $2,000 an ounce throughout Donald Trump's presidency, although geopolitical tensions could lead to further rallies [7]

Core Viewpoint - The global market is anxiously awaiting the Federal Reserve's decisions regarding interest rates leading up to 2026 [1] Group 1 - The Federal Reserve, under the leadership of Jerome Powell, is a focal point for market participants as they anticipate future interest rate changes [1]