Wall Street on Friday advanced more than 1% for the week, with the S&P 500 index hitting 6700 points for the first time ever, as traders shrugged off concerns over the U.S. government shutdown and its effect on economic data. One of the biggest casualties of the shutdown was the jobs report due Friday, which got cancelled after the Bureau of Labor Statistics was left with just one employee.
Last year’s softening in labor markets was primarily a function of increasing labor supply in a low hiring environment. This year, however, labor supply has contracted, in part to the administration’s immigration policy as well as more cyclical factors affecting labor force participation. Labor demand has also continued to weaken as the labor market remains mired in a low hire mode as uncertainty around the tariffs continues to roil Corporate America.
Despite that, the rebound of the S&P 500 from April’s lows has been impressive, and the S&P now finds itself up more than 14% YTD. For the week, the S&P 500 index climbed 1.1%, while the Dow also added 1.1%. The Nasdaq gained 1.3%.
Future Wealth’s View
It is easy to get caught up in the euphoria of seeing our portfolios continuing to soar. But, reality is quite different. Airlines and restaurants are struggling, loan delinquencies are beginning to mount and credit card debt is soaring. Companies that are doing well are the companies that are not dependent on the economy. If the technology sector begins to disappoint, the market will correct and it will be a massive correction.
Companies that are dependent on the consumer are reporting a drop in demand. CarMax is facing problems due to weakening consumer demand and a rise in loan defaults. Lululemon is witnessing a slump in its US business due to decreased consumer spending. Coffee prices are soaring due to tariffs, with lattes hitting $10 per cup.
And layoff announcements are beginning to mount – Accenture: Laid off at least 11,000 employees as part of an AI-focused restructuring program. Microsoft: Announced layoffs of about 9,000 workers, with cuts focusing on managers. Amazon: Continued its wave of mass layoffs, with an announcement in August 2025. Meta: Continued layoffs in 2025 with the company cutting between 5,000 to 7,000 employees.
The wealth effect from higher stock prices continues to keep spending high amongst the wealthy but the impact of higher prices from tariffs and losing jobs is being felt by middle and lower income families. Only time will tell when Wall Street will begin to face the reality of a weakening economy.