Will the shutdown influence the two governor races? Some have stated that the race in both NJ and VA could be a bellwether for next year’s mid-terms. As noted, little attention outside of Washington has been given to the shutdown but will this begin to change if the President follows through with his threat of firing federal workers.
Attempting to answer the introductory sentence, does the governor’s race in NJ and VA really matter to the whole country, hence the Trump agenda.
No, especially if the results are in line with the polling and in line with voter registrations. But it would be potentially of interest if there was a surprise in the results (one way or the other), matched in both races so as to indicate a trend.
For example, an outsized Democratic victory may indicate a shift in public sentiment from the 2024 results (not the expected size victory but an outsized one). On the flipside, a surprise Republican victory (or hyper tight race in theses reliably blue states), may indicate stronger energy to the Republican side and a lack of diminished 2024 momentum.
It about a month the answer may be known, results that could impact the markets.
According to Bloomberg, September was the fifth month in a row of positive returns. The Newswire states there has been five times that the market was up five months in a row since 2009 where it went on to be positive a sixth month in a row and six times that the market had been up five months in a row and went down the next month.
The markets are battling the headwinds of valuations, fully discounted strong third quarter earnings, an accommodative Fed and perhaps the potential negatives of the shutdown that could influence November’s electoral outcome which could be extrapolated for 2026 midterms and the fate of the Trump agenda. In other words, the averages might be priced to almost perfection and any disappointment may increase volatility.
Speaking of volatility, will volatility rise in the Treasury market? Today and tomorrow is a 10 and 30-year Treasury auction. Other sovereign debt has increased in yield, partially the result of the unending demand for monies and the lack of fiscal restraint.
Long dated Treasuries were nominally higher in yield yesterday, perhaps the result of the upcoming auctions causing the yield curve to steepen.
And then there is the question of the tariffs. Will they be declared unconstitutional, causing a refund of the monies which in turn can cause a spike in yields?
What will happen today? It is widely accepted that equities are overbought, however they can remain overbought for a prolonged period.
Because there is a dearth of data, markets may have outsized headline risks.
Last night the foreign markets were mixed. London was up 0.87%, Paris up 0.85% and Frankfurt up 0.67%. China was up 0.52%, Japan down 0.45% and Hang Seng down 0.48%.
Futures are flat. Gold tops $4,000 ounce for the first time, up about 50% for the year and the greatest rally since the 1970s over fiscal concerns of the western democracies. The 10-year is up 6/32 to yield 4.10%.
