Fed Policy Uncertainty Amid Government Shutdown Data Gaps

On November 17, 2025, Jack Ablin—CIO of Cresset Capital—emphasized the Federal Reserve’s critical data gap following the 43-day U.S. government shutdown (the longest in history, ended November 12). The shutdown paused federal data collection, leaving the data-dependent Fed without timely insights into labor markets, economic growth, and inflation [1][3].

Market reaction was immediate: Broad indices declined (Dow -1.02%, S&P500 -0.61%, Russell2000 -1.69%) while defensive sectors (Utilities +0.84%) outperformed. Rate-sensitive sectors like Financials (-2.41%) and Industrials (-1.49%) underperformed, reflecting concerns about policy uncertainty [0].

1. Data Gap Impact
   : The shutdown caused an estimated 0.8% annualized GDP loss (EY analysis) [6]. Critical data points like September nonfarm payrolls (releasing Thursday) and August construction spending remain delayed [5].
2. Market Rotation
   : Defensive sector strength signals investor caution, while Financials’ decline highlights worries about interest rate volatility [0].
3. Partial Data Availability
   : Emergency staff recalls allowed release of some data (e.g., September CPI), providing partial inflation insights [4].

• Risks
  : Incomplete economic data increases Fed policy uncertainty, potentially leading to heightened market volatility in the coming weeks. Unexpected rate moves at the December FOMC meeting are a key concern [1][5].
• Opportunities
  : Defensive sectors (Utilities) may offer stability amid uncertainty. Monitoring upcoming delayed data releases can help anticipate market shifts [0][5].

• Affected Instruments
  : Indices (^GSPC, ^DJI, ^IXIC, ^RUT), sectors (Utilities up, Financials down), and Treasury yields [0][5].
• Key Monitors
  : Delayed data releases (September nonfarm payrolls, August construction spending), FOMC minutes (Thursday), and Fed officials’ comments on data gap mitigation for the December meeting [5][3].