Week ended November 14, 2025: US government reopens

Investors do not like uncertainty, and we had that this past week in abundance both in the U.S. and the U.K.  Investors are able to navigate even poor economic policies – including policies involving regulation, tariffs and/or taxes – but they need to know the plan.  Uncertainty breeds confusion, and that encourages investors to move to the sidelines until there is clarity.  

U.S. government reopens

After 43 days, the U.S. government reopened on Thursday.  The door opened to end the impasse  on Monday, when eight Democratic Senators crossed the aisle, enabling the Senate to narrowly agree yet another stop-gap budget.  The budget was then sent to and approved by the House on Wednesday morning and signed into law by President Trump the same afternoon.  The good news is that the government can now re-open, bringing back into the workforce around 1.4 million federal workers and ending the economic drag on the U.S. economy.  The end of the shutdown should also reverse the growing chaos involving domestic air travel.  The release of important economic data will also resume.

Based on what I have read, the Democrats gained absolutely nothing as far as their stance on eroding healthcare coverage for Americans, both failing in their bid to extend expiring healthcare subsidies and in reversing Mr Trump’s cuts to Medicaid.  I suppose providing healthcare to less fortunate people is a matter of one’s personal philosophy, although the U.S. truly stands alone among its developed market peers in this rather sad respect.  However, the most problematic economic feature of the budget agreement is that it is nothing more than a stop-gap budget, since it will expire on January 30, 2026.   It’s depressing to think that this same saga might be repeated again in less than three months, unless healthcare discussions between Democrats and Republicans in the coming weeks are successful, resulting in an outcome that pleases both parties.  Given the wide gulf in partisanship between the two U.S. political parties, stoked by the inflammatory rhetoric of the leader of the free world, I am far from convinced that we won’t be doing this same dance again before we know it.  Although perhaps anticipated, I think most investors feel the same – the U.S. stock and bond markets more or less said “meh” even as the impasse was broken.

“Tariff dividend”, the mother of all stupid ideas

Further evidence of the Trump Administration’s economic incompetence was brought to bear this past week when Mr Trump and his Treasury Secretary Scott Bessent floated the ridiculous idea of a $2,000 “tariff dividend” to Americans making less than $100,000/year.  This is clearly a page from populism to a rather embarrassing degree.  Such payments would not only make the U.S. debt situation worse, but they would stoke another round of consumption that would put further pressure on prices at a time when inflation remains well above target.  In general, fiscal stimulus measures like direct payments to consumers at a time when an economy remains on firm footing is clambering for economic self-destruction.  Let’s hope the Trump Administration drops this ridiculous idea, which I believe is just one more sign of the pressure that this administration is facing from voters, as the gulf of wealth inequality between the haves and have nots continues to widen.

Next FOMC rate decision, 50/50

Expectations regarding the Fed’s decision regarding the Fed Funds rate at the next FOMC meeting on December 10^th are mixed, with more and more voting members of the FOMC signalling that a rate cut is far from certain.  In fact, the CME FedWatch Tool is suggesting the odds of a hold vs. reduction are about 50/50.

U.K. budget: Labour under fire (and our taxes are going to increase)

Here in Blighty, there is a lot of attention on the U.K. autumn budget, which Chancellor Rachel Reeves is expected to deliver on November 26^th, nearly one month later than normal.  It’s going to be a doozy as her Labour Party toys with the idea of breaking a manifesto promise not to increase income taxes or VAT. The problem is simple – an estimated £30 billion hole (now £20 billion– see below) must be plugged in the budget.  U.K. bond vigilantes are waiting to pounce if there is anything that comes out of the budget that suggests the U.K. fiscal situation might worsen in the coming years.  Labour is truly between a rock and a hard place.  From my perspective, there will be no good news when the budget is released.  I try to stay positive by reminding myself that Brits are notoriously negative and things rarely turn out as bad as expected.  Having said this, Labour has reneged on some of its promised cuts in government expenditures (which have made the deficit worse) and – whether to blame or not – have overseen a slowing economy that is generating less tax revenues.  The budget remains in flux, with trial balloons being constantly floated in the press. 

As of Friday morning, the manifesto-breaking idea of raising income tax rates (i.e. the marginal brackets) appears to have been taken off the table because apparently the Office for Budget Responsibility (“OBR”) revised their economic projections upwards, meaning the budget gap fell to £20 billion.  However, there is still a gap to be closed, plus headroom.  There are a variety of tax-increasing measures apparently still on the table, including things like an exit tax or a maison tax (meaning a tax on houses worth more than £2 million).  I hope that the government does not mess about with an already fragile housing market, but who knows as Labour is all over the place.  This dilemma makes you wish the U.K. shared one of the unique attributes of the U.S. – the ability to pass fiscal policies that are highly irresponsible without any immediate ramifications. (Of course, my American readers should keep in mind that it is future generations that will eventually be forced to confront a debt load that is not sustainable.  When and if bond investors start to punish the U.S. for its fiscal ineptitude is a discussion for another day.)

Investment grade credit spreads/A.I.

Rather unusually, investment grade credit spreads have been widening ever so slightly in the last couple of weeks, at the same time that high yield spreads have been stable to grinding tighter.  This is unusual, and reflects the growing concern of corporate bond investors with the substantial need for capital – much being raised in the bond markets by investment grade tech companies – to finance A.I. capex needs.  It’s one more concern an investor can layer onto the questionable amount of A.I. investment, with concerns in the equity markets now clearly spilling over into the corporate bond market.  Yikes!!

MARKETS LAST WEEK

It was a strange week, with the first half feeling solid following a good end to the prior week, but then risk appetite crumbling as the week wore on.  It is probably hard to pin this on any single event, although I continue to believe that rich equity market valuations coupled with growing angst over A.I. capex is causing some pause.  In addition, the Trump Administration seems to be all over the place with its fiscal approach to policymaking, toeing a line between an increasingly dissatisfied electorate (as far as the U.S. economy) and ongoing pressure on yields and the US Dollar.  In spite of the rhetoric, it is clear that inflation remains a thorn in this administration’s side, and I find myself agreeing increasingly with the Fed’s cautious approach to monetary policy in this respect.  Most likely, this short sell-off is nothing more than a blip and buy-the-dippers will step in and rescue markets, making the situation even more dicey the next time this occurs (and it will). 

Stocks slumped in the second half of the week to varying degrees, with European stocks being the best performer and Chinese stocks the worst.  The culprit in U.S. stocks continues to be the drag coming from pressure on tech stocks, with the NASDAQ not surprisingly delivering the worst performance of the week.  Although touted by its advocates as a safe haven asset and “protection” against fiat currencies, Bitcoin behaved like the risk asset it really is.  The benchmark cryptocurrency was down 8.9% last week, and is now 25% from its intraday high reached only six weeks ago, as investors pivot to risk off.  Gold of course is another matter altogether, with the haven asset gaining 2.1% on the week as investors more to safety.  US Treasuries bounced around, torn by volatile economic signals on one hand, but pulled the other way by the Trump Administration’s ongoing indifference to the level of federal debt. Yields were higher across the curve last week by a few basis points.   

Below are updated tables for the week ended November 14, 2025.

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