The US House of Representatives passed a bill to end the record shutdown on Wednesday evening local time, after 43 days, before it was sent to President Donald Trump to sign into law.
As federal operations prepare to resume and investors reassess growth prospects, ETF Shares CIO David Tuckwell said AI remains the key driver of future productivity and innovation.
“That’s where the growth is; that’s what the future looks like,” he told InvestorDaily.
Despite months of debate over whether the sector represents a bubble or a threat to jobs, Tuckwell argues AI is simply the next evolution of workplace and consumer technology.
“There has been a culture of cynicism around AI. ‘It’s a bubble’ at one extreme, versus ‘it’s going to kill all jobs and lead to human extinction’ at the other extreme,” Tuckwell said.
“Realistically it’s just another layer of workplace and consumer technology, not that different from the internet or the smartphone. The culture of cynicism has resulted in AI stocks being avoided by some and underinvested by many in my opinion. So, to my mind, opportunities will continue to be there.”
Tuckwell noted that markets remained largely resilient throughout the shutdown, despite initial volatility and a brief shift toward safe-haven assets.
“The US government has been shutdown multiple times over the past 10 years as US politics continues to become more of a Punch and Judy show. Markets have mostly taken the shutdown as drama and carried on.”
With key US economic data – including jobs and inflation figures – temporarily on hold, investors turned to alternative indicators to assess the state of the economy.
“Private alternative data providers (e.g., payroll and mobility analytics) are being used more while some official releases are delayed,” he said.
“Trump’s firing of the BLS commissioner has amplified concerns about the impartiality of official numbers. This means that even without the government shut down, data veracity was an issue anyway.”
As a result, the Fed – and investors – may be divided ahead of the December FOMC meeting.
“Traders are currently pricing a 60 per cent probably of one rate cut in December’s FOMC meeting. This represents a steep fall from the 92 per cent probability they were pricing in early October – suggests higher than expected inflation has meaningfully spooked the market,” Tuckwell said.
“We’re seeing most positioning in the bond market (self-evidently) but also in the interest rate sensitive pockets of the equity market – especially REITs.”
T. Rowe Price agrees that the lack of economic data has likely prolonged and deepened divisions within the Federal Open Market Committee (FOMC) on whether to hold or cut rates in December. Chief US economist Blerina Uruci said that if more official data confirms labour market softening, the case for a cut would strengthen.
“However, the lack of information on the inflation outlook could be a strong contention point for the Fed hawks,” Uruci said.
“I maintain my view that the chance of a cut at the December meeting is 50/50.”
The key question, Uruci added, is how much data the US Federal Reserve can obtain before the December FOMC meeting.
“After the US government reopens, the Bureau of Labor Statistics (BLS) is expected to quickly release the September employment report which was collected before the shutdown, but data for October and November will be delayed,” she said.
“BLS – as well as other agencies – will likely issue a new schedule for data releases, with jobless claims data likely to be published promptly since states continued their reporting during the shutdown.”
Uruci believes the US will likely see a hike in the unemployment rate for October, given that the October 2025 reference week (12/10 – 18/10) for the BLS survey overlapped with the federal government shutdown.
“If we see a spike in the unemployment rate of this magnitude for October, I would interpret it as a one-off spike that will likely be reversed in the upcoming months.”
She added that the October Consumer Price Index (CPI) will likely be cancelled since the data was not collected during the shutdown. With government operations resuming, there remains enough time to gather November data – though delays in its release are expected.
T. Rowe Price estimates the shutdown reduced real GDP growth by roughly 10 to 20 basis points per week, based on previous shutdowns.
“This would translate to a GDP drag of anywhere between 0.7 to 1.4 percentage points during the first two months of Q4,” Uruci said.
“However, as furloughed workers are typically compensated for the lost income once the government re-opens, we usually observe a rebound in growth immediately after the shutdown ends.”
Regarding the potential for a risk-on rebound post-shutdown, ETF Shares’ Tuckwell said other factors are likely to have greater influence.
“I think other variables – like inflation prints threatening to keep rates higher; valuations looking stretched in parts of the technology sector; and retail investors’ appetite for short-dated options – will be more of a catalyst for risk-on flows,” he said.
“However, restored consumer confidence from a government reopening may help matter at the margins.”
