When the government’s economic data flow went dark in October because of the federal government shutdown, the markets lost one of their most reliable instruments for navigating uncertainty.
“It’s like driving down the road, and all of a sudden, a bunch of leaves land on your dash, and you can’t see outside your window,” says Martha Gimbel, executive director of the Budget Lab at Yale University and a former White House economist. “You may not get into an accident, but the chance that you get in an accident is higher because you can’t steer.”
Several economists have likened the data blackout to the economy “flying blind,” given that the record-long federal shutdown paralyzed much of the Bureau of Labor Statistics, the Census Bureau, and the Bureau of Economic Analysis, all of which provide key economic figures widely regarded as the gold standard.
The blackout deprived investors and policymakers of crucial data on inflation, employment, consumer spending and growth—information that typically informs everyone from retail investors to portfolio managers and the Federal Reserve.
The lapse, which will affect data through the end of the year, has forced market watchers to improvise—relying on private data, proxy indicators and instinct, in place of the official reports that normally set the tone for markets and monetary policy.
The absence of data also comes as the position at the top of Bureau of Labor Statistics remains vacant. President Donald Trump fired the bureau’s former commissioner, Erika McEntarfer, in August after the agency released a weaker-than-expected jobs report for July 2025 and downward revisions for previous months.
A Shutdown With Far-Reaching Ripples
The shutdown halted regular updates to the Consumer Price Index, producer prices and retail sales, among others. The most visible casualty has been the monthly jobs report, including the monthly unemployment rate, on which the Federal Reserve Open Market Committee relies on its decision making. The Department of Labor published the delayed figures for September after more than a month-long delay, but it canceled the October report and delayed the November report.
“They should have already started fielding the November jobs report surveys,” Gimbel says. “They’re going to have to do it on crunch time, so data from the fourth quarter [are] always going to have a little bit of an asterisk.”
Inflation had shown signs of cooling in the late summer, with core prices rising 2.7% year-over-year in August, not uncomfortably off the Fed’s 2% target. Meanwhile, the Bureau of Labor Statistics has announced that it will not release the Consumer Price Index for October. Additionally, the release of the November CPI has been postponed to December 18 from December 10, positioning its release for more than a week after the next FOMC meeting on December 9 and 10.
The U.S. unemployment rate rose to 4.4% in September, and the October report will not be released, according to the White House. That means the next time the Fed will see employment data is on December 16, one week after its meeting.
Tara Sinclair, an economist at George Washington University, says the lapse is especially damaging in an economy at an inflection point.
“In normal times, we track these data to confirm that we’re still kind of experiencing normal times,” she says. “The timing of this data lapse really couldn’t be much worse, because there’s a lot of uncertainty about the state of the economy right now.”
The Fed in the Fog
FOMC commissioners—already split on a December rate cut, according to recent meeting minutes—typically insist that their decisions are dependent on data. The absence of reliable readings complicates an already fraught policy debate.
Still, the prediction market Kalshi estimated an 83% chance of a 25-basis-point rate cut in December, odds that at one point sank as low as approximately 31% in mid-November.
“The Fed was already getting itchiness,” Gimbel says, noting that inflation risks were still rising, even before the shutdown. “The risks to cutting, given what you know in the data right now, are higher than the risks to staying pat.”
Markets Search for Signals
Despite the anxiety, markets have proved surprisingly resilient. The S&P 500 has held near record territory through November.
“Some investors have said that markets, and the Fed, were flying blind due to the lack of official economic data,” says Jeff Young, head of investment strategy, quantitative solutions, at PGIM. “However, the reality is that markets were not really that bothered.”
Young points out that across 32 trading days during the shutdown, with no government data releases, “volatility of the S&P 500, the 2-year Treasury yield, the 10-year Treasury yield and the U.S. dollar index were essentially no different than in most 32-day periods earlier this year.”
The reason, he says, is that private and high-frequency datasets have filled some of the void.
“Nowadays, we have so much other information that investors can rely on,” Young says, citing state-level jobless claims, credit card spending data, shipping and trucking volumes, and global trade data from U.S. partners. Together, he says, they suggest, “the economy is in a similar place to where it was before the shutdown—slowing down, but not nearly as much as markets had feared earlier in the year.”
Portfolio Managers Turn Defensive
In the absence of official data, portfolio managers are relying more on positioning than prediction. Neil Aggarwal, head of securitized products and a portfolio manager at Reams Asset Management, says the firm has taken a more cautious stance in recent weeks.
“When you’re driving through a fog, you have to slow down,” Aggarwal says. “It certainly warrants caution here, because data [are] lagging. You put all of that together amidst a period of time where the market was forecasting a Fed cut in December, which is now less clear.”
However, Aggarwal says the firm “invites volatility,” using market dislocations as an opportunity to add value.
“The only time that you can really add beta value in fixed income is when there’s volatility,” he says. “So, we focus on those periods of heightened volatility to figure out how we can extract value.”
Still, he says, the range of potential outcomes has widened dramatically.
“Not having the data increases the potential outcomes,” Aggarwal says. “That should bias folks to wanting to de-risk.”
Bonds, Equities, and the New Normal
So far, that caution has been reflected more in tone than in prices. The 10-year Treasury yield has hovered near 4%, while the 30-year sits around 4.7%.
Fixed-income managers say the apparent calm masks deep uncertainty.
“The 10-year today is in a very tight range. It feels like the market is undecided,” says Thanos Bardas, global co-head of investment-grade fixed-income strategies at Neuberger Berman. “This asset class has benefited because there’s no realized volatility. It’s a healthy thing to have some volatility in a range market—it’s part of how capitalism works.”
Most stock indexes were relatively unchanged from October 1, when the shutdown began, through November 24. For example, the Dow Jones Industrial Average was down 0.05% during that period, and the S&P 500 declined 0.19% over the time frame.
“There’s nothing wrong with volatility,” Bardas says. “It’s part of the price formation process to find equilibrium.”
Steering Through the Fog
As investors navigate through the unclear economic data, several other pressures could significantly impact market volatility. The trillions invested in artificial intelligence are often described as a potential “bubble,” as prices for the large- and mega-cap companies in the sector. Additionally, the recent bankruptcies of subprime auto lender Tricolor and auto parts manufacturer First Brands have sparked concerns about private credit.
While the fog may begin to lift early next year, portfolio managers are not waiting for clearer skies.
“You should be prepared for increased volatility,” Aggarwal says. “With the ongoing credit issues and the challenges facing data centers, alongside the overspending in AI and technology, it’s essential to adopt a cautious approach over the next several weeks of investing.”
 |
How Investors Can Approach Portfolio Volatility Heading Into 2026 |
 |
Despite High Market Concentration, Investors Are Holding On |
Tags: Federal Reserve Board, FOMC, Interest Rates, US economy, Volatility