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October 06, 2025

Beacon Weekly Investment Insights 10.6.25

Portfolio Manager, Matthew Kelly, provides insights to guide you through changing market conditions. Please read the full text below or download the PDF version.

Market headlines surrounding the government shutdown were front and center – as the impasse resulted in our elected officials failing to reach a bipartisan agreement by the initial deadline (midnight Tuesday). The first tally recorded in the Republican led Senate was 55-45, falling short of the 60 votes that would have been required to pass the continuing resolution and avert a formal shutdown. Subsequent votes took place on Wednesday and Friday with similar results for reference. As such, the political standoff continued into the weekend, with neither party showing a willingness to yield to the other's requests. Republicans are steadfast in their view that spending needs to be reined in and they prefer to fund the government at current levels for another seven weeks before making any major policy decisions, while Democrats are attempting to uphold one of their core principles – affordable healthcare for all. Specifically, they would like to see a reversal of Trump’s recent Medicaid cuts and an extension of the Affordable Care Act subsidies that are set to expire at the end of this year. To move past this political brinkmanship, our elected officials must be prepared to make mutual concessions, since the legislation’s fate likely hinges on the support of around seven Democrats.

To put the current situation into perspective and provide some historical context, the lapse in government appropriations will result in about 750,000 federal employees being furloughed and a slew of key government programs/services being temporarily shuttered. President Trump went on to insinuate throughout the week that permanent layoffs are not off the table, further complicating matters and adding fuel to the fire. On a more positive note, it is worth underscoring that back pay is guaranteed for most federal employees through the Government Employee Fair Treatment Act of 2019 and the economic impact is normally relatively contained, with the majority of estimates pointing to a 0.1% to 0.2% drag on annualized quarterly GDP for each week the shutdown lasts. Furthermore, using history as a guide, government shutdowns have lasted on average 8 days and despite the bad press that often goes hand in hand with these types of events (20 cases since 1976), the broader market has tended to weather the storm just fine, as depicted in the concluding remarks below. One of the main takeaways from this chart is that episodes of this nature generally result in positive forward-looking returns, even if short-term volatility accompanies this. However, this should be viewed as a guide and not a guarantee, as each market instance is unique and must be evaluated based on its own merits.

Consistent with historical precedent, the major indices were largely unbothered by the media buzz and it turned out to be a record-setting week with all three major indices notching new highs (the Dow Jones Industrial Average & the S&P 500 both ended the week up 1.1%, while the tech heavy Nasdaq finished up 1.3%). Small-cap stocks, which have been trailing for the better part of the year, also caught a bid – notching their own record high on Friday, driven by favorable valuations and expectations for lower rates. Sector wise, artificial intelligence optimism boosted technology stocks to another weekly gain but this was overshadowed by strong performance in healthcare and utility names (which often exhibit more of a defensive posture). In response to several of the conditions outlined above, the bond market witnessed a flight to safety with the 10-year Treasury falling approximately 5 basis points. Gold reinforced its safe-haven status and served as a dependable refuge during a trading week marred by political turmoil, delivering a weekly return of 2.6% and extending its impressive gains for the year. It is also quickly approaching a key psychological level of $4,000/oz. One of the primary factors underpinning gold’s relentless strength is the declining dollar – which continued to falter and is on pace for its worst annual decline in over 20 years.

As a corollary of the shutdown, several key economic reports such as the non-farm payrolls report and initial jobless claims (which are ultimately compiled by the Department of Labor), were not disseminated in a timely manner (first delay of its kind since 2013). All was not lost though – as the market did acquire the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday, which revealed that job openings came in slightly higher than expected (7.22mm vs. 7.19mm), indicating a steady/stable demand for labor. The rest of the report was rather muted – with many of the key turnover metrics relatively unchanged. To round off the topic of the labor market, the ADP private job creation report (that surfaced on Wednesday morning) demonstrated greater significance this week, given the unavailability of the non-farm payrolls report. The ADP report showed a decline of 32,000 jobs in September, missing expectations of +45,000 (notably, the August reading swung from job gains to job losses as well). This development increases the likelihood of a Fed rate cut later this month, with the next FOMC meeting formally commencing on October 28th. Lastly, we uncovered a few new perspectives on the consumer as well as the services/manufacturing industries. Consumer confidence fell during the month of September – as consumers became slightly more pessimistic about short-term economic conditions but on the flip side, demand for big-ticket items remained fairly stable. The ISM Manufacturing Index fell to 49.1 in September, marking its seventh consecutive month of contraction, while the ISM Services Index held at its breakeven point of 50 (neither expansionary nor contractionary).

Looking ahead, the economic calendar is rather light but we will receive some important insights into the health of the consumer, with the release of the consumer credit report on Tuesday. This will be followed by the Fed’s meeting minutes on Wednesday and weekly jobless claims on Thursday (assuming the shutdown is resolved).

Market Scorecard:	10/3/2025	YTD Price Change
Dow Jones Industrial Average	46,758.28	9.91%
S&P 500 Index	6,715.79	14.18%
NASDAQ Composite	22,780.51	17.97%
Russell 1000 Growth Index	4,731.09	17.04%
Russell 1000 Value Index	2,017.79	10.63%
Russell 2000 Small Cap Index	2,476.18	11.03%
MSCI EAFE Index	2,810.41	24.25%
US 10 Year Treasury Yield	4.12%	-45 basis points
WTI Crude Oil	$60.88	-15.11%
Gold $/Oz.	$3,908.90	48.01%