• The federal government shutdown, now in its second week, shows little sign of resolution, impacting the U.S. economy. Investors, however, focus on AI, interest rates, and trade policy, largely ignoring the fourth-longest shutdown on record. Record gold prices may reflect concerns over governments' ability to manage long-term fiscal challenges. Friday's sell-off could signal increased volatility in October, a historically turbulent month, amid shutdown disruptions and trade policy focus. Still, volatility may offer opportunities for dip buyers or portfolio diversification, as we remain optimistic about economic growth and corporate profits into 2026.
  
  
• The federal government shutdown has entered its second week, marking the fourth-longest on record at 10 days. Congress shows little progress toward a resolution. Lawmakers have left Washington, D.C., with the House in recess and the Senate adjourned until Tuesday after a seventh failed vote on a continuing resolution to fund the government through November 21. Republicans and Democrats remain split on including health care measures in the resolution, with minimal progress in negotiations.
  
  Typically, government shutdowns have small, temporary economic effects, as activity rebounds after reopening. However, prolonged closures increase disruptions. If the shutdown extends into a third week, impacts may become more noticeable. Over 650,000 federal employees have missed paychecks, a number that could exceed three million by the third week, including active service members due for payment on October 15. Interruptions to government services, including IRS furloughs, stalled federal program applications, and potential disruptions to benefits like the Women, Infants, and Children nutrition program, will intensify.
  
  

  

  Rising disruptions may drive compromises in Washington, D.C. However, betting markets are pessimistic, with only a 5% chance of resolution by October 15. A three-to-four-week shutdown could noticeably impact fourth-quarter GDP, but we believe it won't threaten the business cycle, and most growth should be recouped early next year.
  
  
• Markets continue to overlook federal government disruptions, focusing on other drivers. The AI trade and prospects of lower interest rates remain key themes. AI news, including Advanced Micro Devices (AMD) supplying AI chips to OpenAI, supports the technology-focused Nasdaq index. This reinforces our preference for overweight exposure to large-cap U.S. stocks in the near term, despite lofty long-term market expectations. The market expects the Federal Reserve to cut interest rates by 25 basis points (0.25%) this month, with 95% probability. This has driven outperformance in interest-rate-sensitive small-cap benchmarks, with the Russell 2000 outpacing the S&P 500 recently.
  
  

  

• A prolonged government shutdown complicates the central bank's work by halting statistical agencies' data releases. The Bureau of Labor Statistics will likely release the October 15 Consumer Price Index inflation data by recalling furloughed workers. However, with the September labor report missing and October data collection suspended, the central bank lacks key employment data.
  
  Consequently, the Fed may continue rate cuts. The September decision to ease policy aimed to mitigate labor market risks, and without new data, continuing this approach seems prudent, especially if the shutdown exacerbates concerns. However, a significant inflation surprise on Wednesday could complicate this decision, as September Fed meeting minutes indicate ongoing inflation concerns. Trade policy also unsettles investors. President Trump's cancellation.
  
  
• Gold prices surged above $4,000 per ounce this week, up from $2,660 at the start of 2025, marking a nearly 50% increase. Higher real interest rates typically depress gold prices by raising the opportunity cost of holding a non-yielding asset, while lower rates support price gains.
  
  

  

• This inverse relationship has held since the century's start but poorly explains this year's rally. Other factors, like central-bank gold-reserve shifts, seem too small or slow to drive such a repricing. Gold rallying as a safe-haven against near-term risks conflicts with equity markets near all-time highs. Market chatter suggests this rally reflects concerns over rising government debt and political pressure on central banks. U.S. public debt is projected to exceed annual GDP next year, and political gridlock signals tough compromises may be elusive. This issue extends beyond the U.S., with debt rising across developed markets. Political pressure on the Fed to cut rates, threats to fire board members, and uncertainty over appointments may undermine confidence in central bank independence, boosting allocations to long-term stores of value like gold.
  
  Quantifying these concerns' impact on gold is challenging, but we will monitor this asset class closely. Given the rally's strength, investors should avoid chasing prices. A basket of broad-based commodities may offer a balanced approach for exposure.
  
  
• The equity market rally has been impressively consistent. Until Friday's trade policy-inspired wobble, the S&P 500 hadn't seen a 1% daily decline in nearly 50 days. Over the past 25 years, there have only been 12 longer streaks.
  
  

  

  Several factors suggest this bump could signal a more volatile market period compared to recent weeks.
  
  * First, October historically shows higher volatility in daily returns over the past 40 years, though this pattern may not repeat this year.
  
  * Second, political or economic news, such as a prolonged shutdown, trade-policy headlines, a cautious Fed, or surprise economic data, could heighten market risks.
  
  * Third, with equity markets near all-time highs and elevated valuations, there’s a greater chance of reassessing fundamentals or profit-taking.
  
  * Market volatility is normal, with three to four 5%-10% dips annually on average. This could offer investors opportunities to enter at better prices or diversify into underrepresented areas.
  
  * We remain optimistic about economic growth and corporate profits in 2026, supported by potential easing of trade-policy uncertainty, tax cuts, and lower interest rates. Investors should focus on the long term.
  
  
• Final Words: Market indicates fear. Buy VOO, VGT, Gold and Silver (GLD & SLV ETF's).
  
  

  

  Below is last week sector performance report.
  
  Weekly Sector Performance for Oct 6-10, 2025:
  
  $XLE Energy: -4.15%, RSI: 34.78
  $XLK Technology: -2.22%, RSI: 49.84
  $XLC Communication: -3.08%, RSI: 34.18
  $XLY Consumer Discretionary: -3.83%, RSI: 36.38
  $XLP Consumer Staples: 0.09%, RSI: 42.16
  $XLF Financial: -2.90%, RSI: 33.88
  $XLV Health Care: -1.87%, RSI: 58.18
  $XLI Industrials: -2.92%, RSI: 39.67
  $XLB Materials: -3.35%, RSI: 34.28
  $XLRE Real Estate: -3.33%, RSI: 33.15
  $XLU Utilities: 1.45%, RSI: 71.01
  
  

  

If you are looking for investment opportunities, you can take a look at our Hidden Gems section, and if you want to see our past performance, visit our Past Performance section. If you are looking for safe and low cost Exchange Traded funds(ETFs), check out our ETF recommendations.

Currrent Shiller PE (see below) is showing overbought conditions as index is far above mean/media and our AryaFin engine is indicating caution. Have a good weekend.

The Buffett Indicator (aka, Buffett Index, or Buffett Ratio) is the ratio of the total United States stock market to GDP.