U.S. equity markets managed to post modest gains overnight as investor sentiment improved on signs that Congress is making progress toward resolving the government shutdown. Despite this, the prolonged political impasse continues to cast a shadow over economic confidence. The shutdown has now reached Day 36, the longest in U.S. history, with an estimated economic cost of USD 14 billion in lost productivity, delayed spending, and stalled federal operations. The impact is beginning to filter through to household sentiment and labour markets.
Consumer confidence has deteriorated sharply. The University of Michigan Consumer Sentiment Index came in at 50.3, the second-worst reading ever recorded, highlighting rising concern about financial stability, job security, and the economic outlook. The ongoing uncertainty is discouraging discretionary spending and delaying business investment decisions.
Labour market data also reflect cracks emerging in what has been one of the most resilient parts of the U.S. economy. The latest Challenger employment report showed job cuts at a 20-year high in October, raising questions about whether corporate America is bracing for weakening demand or preparing for a prolonged shutdown. Meanwhile, total household debt hit a record USD 18.59 trillion, driven by rising credit card balances and high borrowing costs. With interest rates still elevated, consumers appear increasingly stretched.
Internationally, macro data was mixed. China reported a record current account surplus of USD 195.6 billion, supported by robust export activity and resilient capital inflows. The result suggests external demand remains intact despite concerns around global growth. In Australia, the Reserve Bank of Australia held interest rates steady at 3.60%, maintaining a cautious stance as sticky inflation and softening labour data complicate the path forward.
Overall, markets remain sensitive to political developments in the U.S., and the longer the shutdown continues, the greater the risk of deeper economic disruption. Investors are watching closely for signs of a resolution as confidence and labour data weaken.
Here’s hoping the U.S. Government shutdown will be resolved this week. It has now reached a record number of days, affecting the economy and millions of Americans. Approximately 1.4 million federal employees are either on unpaid leave or required to work without pay. Forty-two million people are waiting for food assistance benefits to be processed, and 3.2 million airline passengers have experienced delays due to staffing shortages across aviation services. The estimated economic cost has already reached USD 14 billion — and continues to climb.
Although healthcare-related concessions appear central to the political debate, it is increasingly clear that the shutdown is also being used by President Trump to strengthen his political leverage and further reduce the size and influence of government. To end the shutdown, Congress must agree on a bill that both Democrats and Republicans can support, and then present it to the President to be signed into law. Until consensus is reached, political stalemate remains the base case.
Regardless of the outcome, one key issue will persist: record levels of government debt. As we have noted previously, U.S. federal debt levels must be managed responsibly — both in terms of maintaining the debt ceiling and containing future spending growth. It is not. However, it’s not only government debt that is concerning. Household debt has also surged to record highs, with the latest data showing continued expansion across credit cards, mortgages, and personal loans.
Both trends — rising government debt and rising household debt (See chart below)— point to a broader financial vulnerability. Without decisive action, these imbalances will remain a structural headwind for the U.S. economy.
Total household debt in the United States rose by USD 197 billion in the third quarter of 2025, reaching a new record of USD 18.59 trillion. Mortgage balances accounted for the largest share of the increase, climbing USD 137 billion to USD 13.07 trillion. Credit card balances continued their upward trend, rising USD 24 billion to USD 1.23 trillion, while home equity lines of credit (HELOCs) rose USD 11 billion to USD 422 billion. Student loan balances increased USD 15 billion to USD 1.65 trillion. Auto loan balances were the only category to stabilize, holding at USD 1.66 trillion.
Mortgage activity accelerated during the quarter, with USD 512 billion in new originations — a notable pickup compared to recent quarters, driven in part by pent-up housing demand and refinancing activity among borrowers with strong credit profiles.
The twin debts are a major issue for the US Economy. Imagine if inflation were to pick up and interest rates were to rise?
Recent U.S. Treasury data shows that interest payments on just federal debt reached approximately USD 1.216 trillion for the fiscal year ending September 2025 — the highest in American history. This represents a dramatic increase in the cost of servicing national debt, up from USD 1.0 trillion in 2023 and nearly double the interest cost recorded just five years ago.
The surge has been driven by two converging forces. First, the Federal Reserve’s rapid interest rate hikes in response to post-pandemic inflation have significantly increased borrowing costs. As older, low-rate Treasury debt matures and is refinanced at today’s higher rates, the government faces a rising interest bill even without increasing total spending. Second, the size of the debt itself has grown. With total federal debt exceeding USD 34 trillion, even small increases in the average interest rate translate into massive additional costs.
To put the figures into perspective, the U.S. is now spending more on interest payments than on: National defense, Medicare, and All discretionary non-defense programs combined.
In other words, servicing past spending is now crowding out future spending capacity.
Rising interest payments also limit the government’s ability to respond to crises such as recessions, natural disasters, or geopolitical conflict. With Washington engaged in ongoing debates around government shutdowns, debt-ceiling negotiations, and fiscal priorities, escalating interest costs add another layer of urgency. Policymakers face a narrowing window to stabilize debt growth before interest expenses dominate the federal budget.
This growing burden mirrors what is happening at the household level. Total U.S. household debt reached a record USD 18.59 trillion in Q3 2025, with mortgage, credit card, and student loan balances all rising. Increasing interest rates have made servicing private debt more expensive as well, creating financial strain for consumers at the same time that the government is struggling to manage its own obligations.
The structural challenge is clear: debt sustainability — both public and private — has become a critical economic issue, not a distant problem.
The ongoing US government shutdown, now the longest in history, is likely to extend the halt in US economic data releases. This will leave the spotlight to private data, featuring weekly ADP employment figures and the NFIB Small Business Optimism Index. In Europe, data updates will be headlined by the GDP and labour market insights in the UK, which will join the Eurozone in releasing industrial production. In Asia, investors will turn to China's data dump for industrial production, retail sales, property prices, and credit aggregates. Also, Japan will post its fresh GDP estimates. Finally, a slowing earnings season will see results from Cisco, Disney, and Applied Materials in the US while major reports elsewhere include Tencent, Alibaba, Softbank, Sony, Siemens, Munich Re, and Allianz.
On the currency positioning front, we remain long AUD/USD and AUD/CHF, with both pairs showing strong potential to appreciate. We will look to add to positions on a break above 0.6615 (AUD/USD) and 0.5310 (AUD/CHF). The EUR/USD position continues to perform well, and we are happy to hold. A break above 1.1450 would likely unlock further gains.
On the equity side, short exposure remains relatively small, with some equity returning to the account. We re-entered a short on the S&P at 6,894, which is already generating solid returns. We also opened a small position in gold at USD 3,977 with a stop at USD 3,850. Meanwhile, the wheat position — held as a climate hedge — is showing early signs of bottoming, reinforcing the resilience of the overall diversified strategy.
Trade Focus:
Gold Fundamentals:
A relook. Nothing has changed fundamentally; however, with the debt crisis in the world’s largest economy grabbing more attention, we feel that it makes sense to remain long.
Technical Analysis:
Gold has completed a healthy technical correction, trading back to US3875 and is showing renewed upside momentum again. Support at USD 3,975 has held, moving averages remain bullish, and momentum indicators are turning higher. A break above USD 4,025 would signal resumption of the broader uptrend toward USD 4,250 and potentially a test of the record highs.
JONATHAN BARRATT | CHIEF INVESTMENT OFFICER
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