Investors brush off US government shutdown and weak hiring

The dollar and stocks pushed to fresh record highs on last week, even as the US government shutdown continued and new data pointed to a battered jobs market.

Investors are clearly choosing to look past Washington’s deadlock and patchy labour numbers, focusing instead on earnings strength, policy direction, and liquidity.

This is not unusual. Market history shows that shutdowns have rarely had more than a fleeting impact on financial assets. They create noise, they dominate headlines, but they do not alter structural fundamentals.

This is why, despite warnings from Treasury officials that economic growth could “take a hit” if the closure drags on, investors appear unshaken.

Corporate performance remains the decisive force. Tech, in particular, continues to be the engine pulling markets higher. Strong quarterly results and forward guidance are outweighing weak macro data.

The leadership of these firms has become central to growth, and investors are betting that earnings power from the sector will remain resilient.

The jobs market offers a more complicated picture, but again one that markets are not interpreting as a flashing red signal.

A recent report shows that hiring is down nearly 60% compared to last year, the weakest reading since the global financial crisis. But unemployment sits at 4.34%, based on Chicago Fed data. This reflects a “low fire, low hire” economy rather than one tipping into outright crisis.

Job creation is slowing, but joblessness remains contained. For investors, that means growth is cooling without breaking; it’s a scenario that strengthens expectations for supportive central bank policy. (Ed: note, however, that the government shutdown has so far impeded the release of the latest non-farm payrolls report.)

The dollar’s resilience reinforces the message. It edged higher (Ed: last Thursday at least) against risk-sensitive currencies, showing that investors are focusing on fundamentals instead of political wrangling. Emerging market currencies have weakened, but their equity markets continue to attract inflows from global funds chasing higher returns.

Australia’s market buoyed by resources demand

Europe is following Wall Street’s lead, with cyclical sectors gaining ground as capital rotates toward growth assets.

Asian markets, too, are drawing support from global liquidity, particularly in industries aligned with long-term transformation such as green energy, technology, and infrastructure.

Australia is part of this global story. Its equity market has been buoyed by strong demand for resources, supported by resilient Asian consumption and the shift toward renewables. At the same time, its dollar has felt the push and pull of global risk sentiment.

A stronger US dollar has created headwinds, but foreign inflows into Australian equities remain steady because of the country’s role as both a commodity powerhouse and a relatively stable economy with a transparent policy framework. Investors recognise that Australia stands at the crossroads of global trade flows between Asia and the West, which ensures it continues to attract capital.

Equities are on the up – not just on blind optimism

Momentum itself should not be underestimated. Markets at record highs generate their own gravitational pull. Investors are reluctant to step away when benchmarks are setting fresh peaks. Psychology matters, and right now the dominant narrative is that equities are heading higher unless something genuinely disruptive gets in the way.

I believe this positioning reflects rational calculation, not blind optimism. Liquidity is ample, corporate earnings are strong, and inflation is trending lower. These are the conditions that sustain risk appetite. Shutdowns, hiring slowdowns, or political friction are all noted, but they are not defining the direction of travel.

The risks are real, of course. Inflation surprises could challenge the supportive policy outlook. Geopolitical shocks could jolt sentiment. A disorderly downturn in the labour market could change the picture quickly. But at present, investors see these risks as manageable. They are not abandoning risk assets, because the reward side of the equation is still compelling.

What we are witnessing is not markets ignoring reality, but markets weighing reality and coming to the conclusion that the bullish forces are stronger than the bearish ones.

Earnings leadership, particularly in sectors aligned with long-term structural growth, continues to power equities. Liquidity conditions remain favourable. And the historical precedent of shutdowns being temporary distractions rather than structural events is guiding investor behaviour.

Globally, investors are making careful distinctions. Europe benefits from following the US lead, but its domestic outlook remains mixed, with growth lagging and inflation dynamics less predictable.

Asia is attracting capital for its scale and dynamism, but investors remain sensitive to currency volatility. Emerging markets face pressure from a strong dollar, yet they are still drawing in long-term capital as investors seek diversification and exposure to younger, faster-growing economies. Australia demonstrates how a resource-rich, advanced economy can act as a stabiliser in portfolios while still offering growth exposure.

Backing the rally, positioning for 2026 and beyond

Looking ahead, I expect this resilience to persist unless there is a genuine break in earnings momentum or a major external shock. Equities are scaling new peaks, the dollar is holding firm, and risk assets are still in demand.

Investors are positioning not just for today’s rally but for 2026 and beyond, where technology, policy shifts, demographics, and global capital flows will continue to shape the investment landscape.

Shutdowns will come and go. Labour markets will cool and heat up. But markets are telling us very clearly where their attention lies – and it is on growth drivers that extend well beyond Washington gridlock.

Until the earnings engine stalls or an exogenous event forces a reset, investors are likely to keep backing this rally.

Nigel Green, is the group CEO and founder of deVere Group, an independent global financial consultancy.

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