The government shutdown, which began on October 1st, continues, Congress is in recess, so there is no way to resolve the shutdown at this time. As the shutdown goes on, pain will grow for furloughed government workers and recipients of some government benefits, to say nothing of the workers that the administration plans to lay off. At the same time, many government workers who accepted a payout to resign last spring have now run out of benefits – meaning that if they have not gotten new work, they will ALSO be applying for unemployment benefits. This all adds to weakness in the labor market. But stop worrying about whether your congressional representatives and senators will need to file – NO, they continue to get paid during the shutdown that they caused.
Which leads us to the Federal Reserve Open Market Committee, whose next meeting is later this month. Its dual mandates are full employment and stable prices. While they consider inflation and labor data and then vote on whether and how much to move interest rates, oops – no government data. What will they do?
And will it mess with the historically best quarter of the year – the fourth quarter? I hope not! Of course, as we have been shut down, the stock markets have been reaching repeated new record highs. That seems crazy, but some investors believe that a government shut down saves money. Not historically true, since the cost of reopening exceeds the savings of being closed.
But just to prove that no one is freaking out over the government closure, the fear index (the Cboe Volatility Index) remains in the mid-teens, not showing alarm of any sort. Of course, those of us who are not freaking out are the privileged ones.
Just like the privileged ones who can still afford coffee – which now costs 22% more at the grocery store than it did last year. That’s the biggest increase of any grocery item tracked by the government. Until now, when it is probably no longer tracked by the government.
But the REALLY privileged few are the ones who spend $60 for one pound of Animal Farm Creamery butter (as opposed to $4.36 for regular butter). I might like to taste it, but I’m thinking I won’t get to.
Also in inflation news: the monthly wholesale cost of electricity in U.S. communities near data centers has risen 267%. Per Bloomberg, those costs are being passed on to customers. Do you remember when the biggest worry in electric costs was the mining of bitcoin? Ah, good times. Now AI is behind everything.
The U.S. has long maintained sanctions on Iranian oil exports. but now China has figured out a way around them: barter! In exchange for cheap oil shipped to China (Iran’s biggest oil customer) Chinese companies build infrastructure in Iran. Last year, up to $8.4 billion in oil payments flowed through this conduit. Meanwhile, eight OPEC+ cartel members have agreed to increase oil production in November by 137,000 barrels each day – the same as the increase they approved for October. Although increased oil production generally causes oil prices to fall, OPEC+ is hoping it can walk across the razor’s edge and gain market share without hurting prices. Watch this space.
For the week ending on October 3rd, the Standard & Poor’s 500 closed at 6,715, the Nasdaq Composite at 22,780, and the Dow Jones Industrial Average at 46,758. The yield on the ten-year Treasury Note finished at 4.119%. U.S. crude oil was down slightly for the week at $61.19 per barrel, while N.Y. gold was up at $3,887.09 per ounce. One Euro was worth $1.17.
Elizabeth E. Cook
Partner, Diastole Wealth Management
News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Barron’s, Axios, Business Insider, The Wall Street Journal, Bloomberg, The New York Times, CNN, CNBC, Reuters, The Associated Press, and NBC. If you have questions, please call Diastole at 203.458.5220, or reply to this email to reach me, Liz Cook.
The newest world’s tallest bridge is the Huajiang Grand Canyon Bridge in Guizhou province, China. It soars about 2,050 feet above the river below. Prior to its being built, the previous world’s tallest bridge crossed the same river at 1,854 feet. The Huajiang Bridge reduces travel time to cross the river from two hours to two minutes. And happily, the Chinese government built the bridge, so it can make some lucky driver be the first to cross it! Yay! Not me! (Per NBC: “The bridge has a high-speed glass elevator that can send visitors to a coffee spot 2,600 feet above the river. Visitors can also try bungee jumping or a 1,900-foot-high glass walkway.” Yay! Not me again!)