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Market Review
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US Govt shutdown can’t dim AI’s rise-up

While shutdowns have not historically changed the direction of the US economy, there were a couple of differences this time around that could affect how the market eventually reacts.

The US Government entered a shutdown this week.

Will Mace Sat, 04 Oct 2025

The United States Government’s ‘shutdown’ dominated the week’s headlines, but barely nudged the main indices, as artificial intelligence’s rise continued to drive the market.

Disagreement between Democrats and Republicans over Federal Government funding led to government functions grinding to a halt during the week, in what is the first shutdown since a 35-day pause in December 2018, which saw 380,000 staff furloughed. The S&P 500 rose more than 10% during that shutdown.

After the shutdown was confirmed, all three major US market indices were near record highs as of Thursday’s close in that time zone – the Nasdaq was up 2.05% for the week, while Dow Jones and S&P 500 were up 1.25% and 1.68% respectively.

While shutdowns have not historically changed the direction of the US economy, Generate Investment Management investment specialist Greg Smith told NBR there were a couple of differences this time around that could affect how the market eventually reacts.

For one, President Donald Trump seems to be threatening to use the shutdown as an opportunity to cut swathes of federal employees, which have typically come back to work – often with backpay – when a shutdown ends.

Any long-term adjustments to that workforce would add to concerns over unemployment, which is a key factor determining whether the Federal Reserve will cut interest rates, and by how much, at its next meeting at the end of October.

The shutdown also meant the Bureau of Labor Statistics did not release vital non-farm payrolls data, which was due overnight, meaning the market has less information available to it to inform views about the unemployment picture.

For as long as the shutdown persists, the market – and, crucially, the Federal Reserve’s monetary policy setting committee – will not have that data to rely on in making decisions.

Federal Reserve chair Jerome Powell.

Instead, many in the market used this week’s ADP National Employment Report, a measure of private employment in the US, to gather hints about the job situation. The report showed payrolls at private employers declined by 32,000 jobs in September.

“The ADP report was pretty bad,” said Smith, adding: “32,000 jobs lower there, when the expectation was for a 50,000 gain. So 80,000 is quite a big difference.

“That alone has boosted the prospects for rate cuts. Obviously the next one is pretty much priced in, and then there's been some questions over the next one after that, but I think that's probably solidified that [cut]…

“It all adds up to: the job market is facing some challenges.”

AI influence

But the influence of AI rumbles on, as stocks such as Nvidia, Oracle, and Intel continue to appreciate, alongside the rising valuations of OpenAI and Anthropic.

Nvidia shares are up 6% in the past five days and 36.6% for the year to date, while Oracle is up nearly 74% this year, and Intel is up 84%.

“Nine companies in the US are worth more than a trillion dollars,” said Smith. “The ninth is Berkshire Hathaway, the other eight are all tech names. They account for around 35% of S&P 500. They make up a sixth of global stock market capitalisation.

“It’s fair to say there’s a lot of concentration here, but it just keeps on going.”

That momentum hasn’t been interrupted by regulators, where Alphabet/Google managed to avoid the prospect of having to sell its Chrome browser business, so Smith reckoned it wouldn’t be calmed until at least the next quarterly earnings reports later this month and into next.

 

Will Mace Sat, 04 Oct 2025
Contact the Writer: william@nbr.co.nz
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US Govt shutdown can’t dim AI’s rise-up
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