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Govt. shutdown staying in place places more downside risk to economy, says Raymond James' Larry Adam
11/5/2025, 6:46:30 PM
Economic Summary
- The government shutdown, if prolonged, could trim growth; prior to the shutdown the economy was expected to grow roughly 0%–0.5% this quarter.
- Tariff uncertainty from Washington is likely to persist; if the Supreme Court overturns prior actions, the administration may reimpose tariffs through alternate authorities, keeping trade policy risk elevated.
- Equity market pullbacks have been unusually small since April: the largest drawdown was just under 3% and there was a 105-day stretch without a >3% pullback, the second-longest since 2000.
- Technicals show the market about 12% above the 200-day moving average, implying a normal 5%–10% correction would still keep the uptrend intact.
- Earnings divergence: mega-cap tech saw roughly 17% earnings growth this quarter versus 8% for the rest of the market, and mega-cap tech are expected to grow about 19% in Q4 versus about 3% for others.
Bullish
- Mega-cap tech fundamentals remain strongest with much higher earnings growth.
- Market has repeatedly bought pullbacks; recent drawdowns have been unusually shallow.
- A 5%–10% pullback would still keep the market on an upward trend above the 200-day average.
Bearish
- Prolonged government shutdown could further weaken the economy and increase downside risk to growth.
- A normal corrective pullback of roughly 5%–10% is likely if softness starts impacting earnings.
- Weak consumer spending ahead of the holidays — 88% of survey respondents plan to spend the same or less.
- High-beta mega-cap tech/media/telecom names would be more negatively impacted in a market downturn.
People mentioned
Larry Adam