Is an end to the shutdown in sight?
Summary
The government shutdown reached its 41st day, the longest on record. On Monday morning, markets were optimistic after the Senate advanced a bill late Sunday night, setting the stage for the government to reopen as soon as later this week. Employment rose by 42,000 jobs in October, slightly above expectations.
The S&P 500 dropped 1.6% last week, driven by falling tech stocks and layoff-related economic concerns. Year-to-date, the S&P 500 has gained 15.6%. The yield on the 10-year U.S. Treasury ended the week unchanged from the prior week at 4.11%.
Mamdani defeats Cuomo in NYC mayoral race
In New York City, Zohran Mamdani defeated Andrew Cuomo, which has increased market uncertainty and created mixed reactions, particularly in real estate. His platform, which includes rent freezes, stricter tenant protections, and proposals to increase taxes on the wealthy, has been linked to a phenomenon dubbed the “Mamdani effect,” where affluent New Yorkers are reportedly driving a surge in demand and price increases in suburban housing markets outside the city, anticipating potential policy shifts.
Consumer sentiment hits a multi-year low
U.S. consumer sentiment fell sharply in November, with the University of Michigan’s index dropping to 50.3, its weakest reading since mid-2022. The prolonged shutdown and persistent inflation weighed heavily on households, especially those with lower incomes.
Short-term inflation expectations rose to 4.7%, while long-term expectations eased slightly to 3.6%. The Current Economic Conditions index hit a record low. Even among higher-income households, optimism slipped as layoffs and stagnant job growth fed broader economic unease.
With many government data releases paused, private surveys like Michigan’s have become critical barometers for economic confidence.
U.S. housing market
Mortgage rates climbed to 6.22% last week after four consecutive weeks of declines, following Fed Chair Jerome Powell’s hawkish comments on future rate moves.
Even with recent easing, affordability remains stretched. Home prices have climbed roughly 50% since 2020, while incomes have lagged. The national home price-to-income ratio now exceeds five, up from a long-term average near four.
Taxes and insurance costs have surged about 45% since 2019, further straining buyers. Builders are holding record inventories of unsold homes, prompting discounts and rate buydown offers. Adjustable-rate mortgages, which provide about 0.75% savings versus fixed loans, now make up 10% of purchase applications, up sharply from 3% in early 2021.
The week ahead
This morning, November 10, the Senate advanced a House bill aimed at reopening the government, lifting market sentiment, and pushing risk assets higher. The next step is House approval, which could come as early as this week. Prediction markets now imply a 90% likelihood of resolution.
The bill includes pay guarantees for furloughed federal workers, adding reassurance for both households and investors.
Fed officials, including Governor Barr (Tuesday) and Governors Waller and Miran (Wednesday), have several speaking events this week. Due to the government shutdown, releases of the CPI, retail sales, and PPI will be delayed. If the shutdown extends through Thursday, the Department of Labor will postpone the official jobless claims report, though preliminary state-level data should still be available.
Disclaimers
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