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Financial data background showing US markets resisting shutdown effects.
UPDATED Selective US

Shutdown Fails to Halt US Markets as Stocks, Gold, and Bonds Reach Records

Markets hit records amid government shutdown

U.S. stocks and gold broke all-time highs in October 2025 despite federal government shutdown delaying economic data.

  • S&P 500 and Nasdaq reached record closing highs
  • Gold surpassed $4,000 per ounce for first time
  • Bond funds posted strongest yearly gains since 2019
  • S&P 500 forward P/E ratio stands at 24.05
  • Fed meeting October 28-29 expected to cut rates
  • Bank of America forecasts additional 25-basis-point cut in October
  • AI stocks led Q3 with 15.7 percent quarterly gain
  • Technology services market reached $32 billion in Q3

The October 2025 government shutdown delayed key economic data releases but failed to derail financial markets. By October 10, U.S. equity benchmarks had reached fresh all-time highs, gold broke through $4,000 per ounce for the first time in history, and bond funds posted their strongest year-to-date returns in over a decade.

Market Performance Amid Government Disruption

On October 7, the S&P 500 closed at 6,740.28—its seventh consecutive daily gain and a new record. The Nasdaq Composite ended at 22,941.67, also an all-time high. The Dow Jones Industrial Average slipped 0.1 percent to 46,694.97, but the Russell 2000 small-cap index recovered to its prior peak.[1][2]

Key market movements include:

  • Gold climbed to $4,015.59 per troy ounce on October 10, extending its 2025 rally to more than 50 percent.
  • Gold briefly touched $4,059 during overnight trading on October 8, marking the first breach of the $4,000 threshold.[3][4]
  • The iShares U.S. Aggregate Bond Index Fund reported a year-to-date total return of 6.09 percent through October 9, the best annual performance since 2019.[5]

Read More: US stocks and gold retreat from record highs as Wall Streets rally pauses

Valuation Concerns Intensify

Equity valuations have expanded faster than corporate earnings. Highlights include:

  • S&P 500 forward 12-month price-to-earnings ratio: 24.05 as of October 10 (down from 2024 peak of 28.12, still above historical median of 18.17).[6]
  • Shiller cyclically adjusted P/E ratio remains near dot-com bubble levels.
  • Small-cap stocks, especially unprofitable growth names, face high downside risk if investor sentiment shifts or earnings disappoint.[7]

Corporate Earnings Must Justify Prices

Analysts project S&P 500 earnings per share will rise 8.0 percent year-over-year in Q3 2025. Companies must meet or exceed consensus estimates and provide optimistic 2026 guidance. Key considerations:

  • Major financial institutions, technology giants, and consumer-facing companies report results throughout October.
  • Sustaining current share prices depends on meeting earnings and providing forward guidance.[8]

Federal Reserve Rate Path

The Fed reduced its benchmark rate by 25 basis points in September to 4.00–4.25 percent, the first cut since December 2024. Markets currently price in a 98% probability of another quarter-point reduction at the October 28–29 meeting.[9][10]

Key developments and expectations:

Event / Indicator Details
Rate-cut forecast Bank of America moved forecast from December to October due to softening labor data
Additional cuts Two more quarter-point reductions expected by mid-2026; fed funds rate projected at 3.75–4.00%
Data impact Government shutdown suspended jobs report and other economic releases; Fed relies on alternative labor signals
Market risk Delayed data could amplify volatility as traders adjust rate-cut expectations without official confirmation[11]

Artificial Intelligence Sector Performance

A Morningstar index tracking 38 AI-related stocks gained 15.7% in Q3 2025, more than double the S&P 500 return. Notable performers:

  • Corning: +53.25%
  • Teradyne: +49.54%
  • Arista Networks: +40.13%[12]

Additional context:

  • Technology services market reached $32 billion in annual contract value in Q3.
  • Growth driven by a 31% year-over-year surge in as-a-service (XaaS) offerings.
  • Cloud migration and AI deployment remain critical for productivity gains and profit growth into 2026.[13]

Historical Context and Outlook

Past government shutdowns had minimal lasting impact on equity markets:

  • 2013 shutdown: 16 days, S&P 500 fell 3% but recovered within two weeks.
  • 2018–2019 shutdown: 35 days (longest), coincided with 9% market decline, though macroeconomic factors were larger contributors.[11]

Investors are balancing three key drivers:

  • Continued AI-driven productivity gains.
  • Expectations for lower borrowing costs.
  • Elevated valuations that leave little room for disappointment.

Additional context:

  • Gold’s historic rally reflects inflation concerns and geopolitical uncertainty.
  • Bond gains indicate confidence that the Fed will manage a controlled economic slowdown without triggering a recession.[3][9][14]
Rachel Patel

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Rachel Patel is a senior news editor and journalist specializing in political journalism and digital media. With over seven years of professional experience, she is recognized for her accuracy, source verification, and audience-focused reporting approach. Rachel earned her M.S. in Journalism & Media Studies from Stanford University (2018), where she developed expertise in media ethics, political communication, and digital storytelling. Her career has centered on bridging traditional political reporting with the fast-paced world of online journalism. She has contributed to major global media outlets, analyzing how digital platforms — from YouTube and Reddit to TikTok and Bluesky — shape political narratives, influence public opinion, and redefine news consumption. Now based in Berlin, Germany, Rachel serves as a Senior News Editor at Faharas NET, leading coverage on digital politics, media literacy, and social communication trends in the modern information landscape.

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Editorial Timeline

Revisions
— by Michael Brown
Appropriate internal links were placed.
— by Howayda Sayed
  1. Completely rewrote article with facts verified as of October 8-11, 2025.
  2. Updated all market data, index levels, and precious metal prices to October 10, 2025.
  3. Added comprehensive research from 14 authoritative financial sources.
  4. Replaced outdated information with latest Fed rate-cut forecasts and meeting dates.
  5. Included Q3 2025 AI sector performance data and technology services market figures.
  6. Enhanced article structure with BLUF opening and clear H2/H3 hierarchy.
  7. Added three new FAQ entries addressing key investor questions.
  8. Completed all meta boxes with fresh summaries, key points, citations, and corrections.
— by Howayda Sayed
Verified and updated all financial data sources.
— by Howayda Sayed
Improved introduction to show market impact clearly.
— by Howayda Sayed
Added a clearer and more relevant title.
— by Howayda Sayed
Initial publication.

Correction Record

Accountability
— by Howayda Sayed
  1. Update index closing levels and precious-metal prices daily, citing market data providers.
  2. Specify bond-fund names when referencing record performance (e.g., Bloomberg Barclays U.S. Aggregate).
  3. Maintain forward P/E and Shiller CAPE metrics in valuation analyses, citing S&P Dow Jones Indices.
  4. Reference FactSet’s Q3 2025 EPS growth forecast and sector guidance splits for profit outlook context.
  5. Cite CME Group and Trading Economics for Fed rate-cut probabilities and projections.
  6. Use Morningstar performance reports to detail AI sector gains and leading contributors.
  7. Include byline, publication date, and source notes to comply with Google News transparency standards.

FAQ

Why did U.S. stocks reach record highs during the October 2025 government shutdown?

Markets remained resilient because the shutdown did not directly affect corporate operations or consumer spending. Investor optimism was driven by expectations for additional Federal Reserve rate cuts, strong third-quarter corporate earnings projections, and sustained momentum in artificial intelligence stocks. While past shutdowns have caused temporary volatility, equity markets typically recover quickly once funding is restored.

What factors drove gold prices above $4,000 per ounce for the first time?

Gold surged past $4,000 due to persistent inflation concerns, geopolitical uncertainty, and central bank demand for reserves diversification. The metal has gained more than 50 percent in 2025 alone, accelerating from earlier gains in 2024. Investors also view gold as a hedge against currency debasement when governments run large deficits and central banks maintain accommodative policies.

What is the Federal Reserve expected to do at its October 28-29 meeting?

The Federal Reserve is widely expected to cut its benchmark interest rate by 25 basis points to a range of 3.75 to 4.00 percent. Market-based indicators show a 98 percent probability of this reduction. The Fed reduced rates by a quarter point in September for the first time since December 2024, and additional cuts are anticipated through mid-2026 to support employment and economic growth.