Muzinich Weekly Market Comment: The US Shutdown Ends

November 17, 2025

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Last week, the US federal government shutdown came to end. Investors now expect an avalanche of delayed data over the next few weeks to help fine-tune the market’s views of US economic momentum as we end the calendar year. At the same time, some data may prove hard to recover (e.g. monthly employment data); while corporations maintain records of past hirings and layoffs, October’s household survey will admittedly be more difficult to collect. Consequently, the US Bureau of Labor Statistics may not be able to publish an unemployment rate for the month. Similarly, it seems unlikely that October store prices will be recovered for CPI (Consumer Price Index) calculations.

Federal Reserve (Fed) Chairman Powell had mentioned in the October press conference that the Fed should have enough information not to miss a significant change but may not have all the usual data granularity. It remains to be seen whether sufficient data will be released before the December meeting. Considering the critical nature of data for policy rate decisions - especially at a time when views seem to be widely dispersed - markets and investors are in somewhat uncharted waters. Fed speakers this past week signaled continued caution regarding the likelihood of lower rates while inflation remains elevated.

Meanwhile, in the UK, as the 2026 budget presentation approaches, speculations are affecting both the gilt and pound markets. The current government is caught between the need to raise taxes (to present a market friendly budget), and the manifesto of the last election, which promises not to raise taxes. Against a backdrop of internal tensions within the Labour Party, the temptation not to raise taxes seems to be weakening both the currency and the gilt markets; this past week, the gilt yield rose, and the pound touched new lows against the euro.

In Germany, Chancellor Merz seems to be trying to deliver on election promises by working on the previously announced “autumn of reforms.” This past week, the German government announced a plan that included establishing fixed energy prices until 2028 for corporates with intensive energy use, tendering 8 gigawatts of capacity for gas power plant construction, and reducing air traffic control fees.^[1]

Several European Central Bank (ECB) speakers confirmed they view the current level of policy rate as appropriate, indicating a high bar for a change at the ECB’s December meeting. The ECB regularly highlights that its attention is shifting increasingly to inflationary (ex. energy) measures. Forecasts on inflation (ex. energy) tend to be more stable than headline numbers, and the relatively minimal downside deviation from 2% expected over the course of 2026 would likely not require a policy rate adjustment.

Looking ahead to the coming week, the Euro Area preliminary PMI (Purchasing Managers’ Index) for November will be released and will provide an important data point amidst the dispersion that tends to characterize the Euro area. Dispersion by country, especially as Germany tries to exit its structural stagnation while France contends with political uncertainty. Dispersion by sector as manufacturing remains tepid while services are buoyant, and dispersion across the business landscape given optimistic business outlooks even as current production stalls.

Last week, we saw most Euro government bond yields - including that of the 10-year Bund - rise amidst spreads that moved sideways to modestly higher. Oil prices moved slightly lower over the week, while gold lost all week’s gains during Friday’s session.

Turning our attention to news from China, we note that the housing activity index fell to the lowest level since 3Q 2024. Home prices - new and secondary - continue to fall while sales and completion numbers are also suffering. At the same time, inventories remain high. See Chart of the Week. While some growth in retail inflation was initially considered positive news in a country facing deflation risk, the specter of sustained producer pricing declines tempers hopes for normal, near-term consumer price growth.

Chart of the Week: Property Indicators in China

Source: Bloomberg, as of 31^st October 2025. For illustrative purposes only.

Past performance is not a reliable indicator of current or future results.

References to specific companies is for illustrative purposes only and does not reflect the holdings of any specific past or current portfolio or account.

References

[1] Reuters, ‘German coalition agrees to subsidized power price for industry,’ November 13, 2025

This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Reference to the names of each company mentioned in this communication should not be construed as investment advice or investment recommendation of those companies. The opinions expressed by Muzinich & Co. are as of November 14, 2025, and may change without notice. All data figures are from Bloomberg, as of November 14, 2025, unless otherwise stated.

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