Alternative Economic Data Shows Solid Growth Amid Fed Policy Uncertainty

This analysis is based on the Barron’s report [1] published on October 31, 2025, which highlighted that despite Washington being “closed for business,” alternative economic data points to solid growth in the second half of 2025. The publication covered investment commentary on housing market troubles, oil price outlook, and attractive dividend stocks [1].

The economic landscape is significantly shaped by the Federal Reserve’s October 29, 2025 decision to cut interest rates by 25 basis points to a range of 3.75%-4.00% [2]. However, Fed Chair Jerome Powell indicated this might be the final rate cut of 2025, citing “strongly differing views” within the Fed and uncertainty due to the federal government shutdown limiting access to official economic data [2]. The central bank announced it would end quantitative tightening on December 1, 2025 [2].

Following Powell’s comments, markets reduced bets on another December rate cut from 85% to 67.9% probability [2]. The S&P 500 ended largely flat, surrendering earlier gains after the rate cut announcement [2].

• S&P 500 (^GSPC): 6,840.19, down 0.50% [0]
• NASDAQ Composite (^IXIC): 23,724.96, down 0.91% [0]
• Dow Jones (^DJI): 47,562.88, down 0.10% [0]

• Shanghai Composite: 3,954.79, down 0.81% [0]
• Shenzhen Component: 13,378.21, down 1.14% [0]
• ChiNext: 3,187.53, down 2.31% [0]

Energy and Financial Services led gains, while Technology and Utilities lagged [0]:

• Top Performers:
  Energy (+2.81%), Financial Services (+1.38%), Real Estate (+1.77%)
• Underperformers:
  Technology (-1.74%), Utilities (-1.99%), Basic Materials (-1.30%)

Despite some relief from declining mortgage rates, the housing market faces ongoing structural challenges:

• 30-year fixed mortgage rate: 6.118% (down from 6.152% one week ago) [3]
• 30-year jumbo rate: 6.341% (down from 6.422% one week ago) [3]
• 30-year FHA rate: 6.006% (down from 6.020% one week ago) [3]

While mortgage rates have fallen to their lowest level in over a year [4], homebuyers still face significant affordability challenges. Purchase applications increased 5% for the week ending October 24, suggesting some buyers returning to the market [4]. However, the Fed has noted “deterioration” in the U.S. housing market [4].

Oil prices have shown significant volatility due to geopolitical factors. Prices jumped more than 5% after President Trump targeted Russia’s key oil industry with new sanctions aimed at ending the war in Ukraine [5]. These sanctions represent a substantial escalation in energy market disruption [5]. The energy sector’s strong performance (+2.81%) on October 31 reflects these geopolitical tensions [0].

In the current volatile environment, dividend stocks are gaining increased attention:

• United Bankshares (UBSI): 4.14% yield [6]
• Peoples Bancorp (PEBO): 5.71% yield [6]
• Ennis (EBF): 6.06% yield [6]
• Columbia Banking System (COLB): 5.46% yield [6]

The financial services sector’s strong performance (+1.38%) aligns with the appeal of dividend-paying banks [0][6].

The federal government shutdown has created significant information gaps that increase market uncertainty:

• Official Economic Data:
  The Fed acknowledged limited access to key government reports, with unemployment data only available through August [2]
• Alternative Data Reliance:
  Policymakers are increasingly dependent on private sector data and Fed surveys [2]

This data drought increases uncertainty around economic assessment and policy decisions, potentially leading to more cautious Fed action [2].

The 10-2 vote on the October rate cut, with dissents in both directions, signals growing policy disagreement [2]. This division could lead to more data-dependent decision-making, potential policy paralysis if uncertainty persists, and increased market volatility around Fed meetings.

The sanctions on Russian oil create both opportunities and risks. Supply disruption could support higher energy prices benefiting energy stocks, but higher oil costs could complicate the Fed’s inflation management efforts.

Any reversal in mortgage rate declines could quickly stall housing activity, while job market weakness could reduce housing demand despite lower rates.

The current market environment is characterized by several key dynamics. Alternative economic data suggests solid growth momentum despite Washington gridlock [1], while the Federal Reserve signals potential completion of its 2025 rate-cutting cycle amid internal policy divisions [2]. The data drought resulting from the government shutdown has increased reliance on private sector indicators, creating uncertainty around economic assessment.

Sector performance shows clear rotation patterns, with energy (+2.81%) and financial services (+1.38%) leading gains, while technology (-1.74%) and utilities (-1.99%) lagged [0]. The housing market presents a complex picture, with mortgage rates at yearly lows [4] but persistent affordability challenges limiting recovery potential [3][4].

Geopolitical factors, particularly sanctions on Russian oil [5], have created energy market volatility that benefits the sector but poses inflation risks. In this environment, dividend-paying financial stocks [6] have gained appeal for their income characteristics amid broader market uncertainty.

The analysis reveals several risk factors that warrant attention. The Fed’s internal policy disagreements [2], combined with limited official economic data due to the government shutdown [2], suggest increased market volatility and uncertainty around future monetary policy decisions. Investors should be aware of these dynamics when evaluating market conditions and potential investment opportunities.