Market Note: Confidence Returns as Growth Broadens

By Hightower Great Lakes on October 6, 2025

All Time Highs Amid Government Shutdown

Stock indexes continue to climb, with the Dow Jones Industrial Average, S&P 500, and Nasdaq all reaching new record highs, as investors remained unfazed by the ongoing U.S. government shutdown. U.S. government shutdowns generally have minimal long-term effects on the economy. However, in the short term, GDP typically declines by 0.1 to 0.2 percentage points for each week the shutdown persists.

While there is no way to predict how long the shutdown will last, the average length of shutdowns is 8 days. Estimates on the current shutdown show that this shutdown can last up to three weeks. The Atlanta Fed’s GDPNow tracker recently came in at a strong 3.8%, signaling robust momentum in the U.S. economy.

This solid growth estimate highlights the underlying strength of consumer spending, business investment, and labor market resilience. It’s this broad-based economic momentum that’s allowing investors to largely shrug off concerns around the ongoing government shutdown.

Markets are clearly focusing on the bigger picture of an economy that continues to expand at a healthy pace, fueling optimism and driving major indexes to new all-time highs. The data suggests that growth is not only intact but accelerating, reinforcing a bullish outlook moving forward.

Upcoming earnings to Spark Strong Q4

With Q3 earnings season underway, solid corporate results and upbeat outlooks have the potential to spark a market turnaround. Historically, when earnings season gets underway and fiscal policy concerns subside, early-October drawdowns have often been followed by rallies.

The 30-year fixed mortgage rate has seen a significant decline, dropping from 7.4% on January 13 to 6.1% today. This downward trend is important not just for the housing market but also for overall consumer affordability.

Lower rates ease financial pressure, making it easier for consumers to manage expenses and stay resilient. Along with steady job growth and rising wages, the decline in mortgage rates is a key factor supporting consumer strength in the current economic environment.

Sector and Theme Insights

U.S. markets have historically traded at a premium compared to many international markets. This is often attributed to stronger corporate governance, greater transparency, and more efficient capital allocation.

U.S. companies are generally more disciplined with free cash flow, often returning value to shareholders through share buybacks and dividends, while also reinvesting in growth via capital expenditures. The depth and liquidity of U.S. financial markets further enhance their appeal to global investors.

Additionally, a culture of innovation and a resilient regulatory framework contribute to sustained investor confidence. While valuations may appear elevated, they often reflect the quality and consistency of earnings in U.S. equities.

The financial sector remains attractively valued, still trading below 22 times forward earnings despite a strong recent performance. This suggests there may still be room for upside. While industrials aren’t as cheap relative to other sectors, long-term tailwinds from growing investment in data centers and power grid infrastructure could provide meaningful support.

In the auto industry, names like General Motors and Ford have surprised to the upside, recently hitting 52-week highs, an unlikely outcome. These developments highlight the breadth of opportunity across sectors. Even areas considered expensive, such as technology, are priced that way for good reason, reflecting strong earnings power and structural growth trends. Overall, the market continues to offer a mix of value and growth opportunities for selective investors.

Crypto and digital assets are becoming an increasingly legitimate part of the financial ecosystem, with platforms like Coinbase playing a central role in building institutional trust and infrastructure. Exchanges today are deeply focused on creating transparent, secure environments for both buyers and sellers.

A key driver of this trend is the younger generation of investors who aren’t just open to cryptocurrency but actively incorporating it as a core component of their portfolios. As adoption grows, so does its relevance as a structural theme.

Currently, most wealth management platforms restrict advisors to allocating just 2% of client assets to crypto, but if that threshold rises to even 5%, it could unlock significant inflows across the ecosystem. This shift would benefit not only the exchanges but also the broader crypto market, reinforcing its position as a long-term thematic opportunity.

Fixed Income

Last week, the U.S. Treasury yield curve fell across the curve following weaker-than-expected labor market and consumer confidence data. In the absence of the official nonfarm payrolls (NFP) data due to the government shutdown, markets looked to the ADP private payrolls, despite a historically weak correlation to the NFP report. By week’s end, the 2-, 10-, & 30-year yields fell by 7, 6, & 4 basis points, respectively.

Spread performance diverged across ratings last week. Investment-grade spreads narrowed 1 basis point to + 113, while high-yield spreads widened 3 basis points to+329. For the fifth consecutive week, U.S. credit quality has improved as the main rating agencies issued 43 upgrades and 38 downgrades.

The Financial sector led with the most upgrades, while the Consumer Discretionary sector had the most downgrades. Investment-grade issuance in September was very active with $214 billion of supply, up 61% versus the past 4-year average of $133 billion, marking the fifth largest issuance month on record.

Tax-exempt yields were mixed across the curve last week as front-end yields increased by 1-3 basis points, while intermediate and long-end yields fell by 2-4 basis points, respectively.

Click here to read last week’s Market Note (9/30).

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