Please see below article received from EPIC Investment Partners yesterday, which provides an update on the US economy.
Concerns over the health of the US economy are mounting, driven by a sharp decline in sentiment, a softening labour market, and the disruptive reality of a government shutdown. These compounding headwinds suggest a period of economic caution, making a compelling case for defensive, undervalued, fixed income issued by the wealthy nations.
Recent data paints a clear picture of deterioration. The Conference Board’s US Consumer Confidence Index fell to a five-month low in September. Crucially, the measure of expectations for the next six months remains below the 80 threshold that has historically signalled a recession. This weak sentiment is rooted in job worries, with the gauge of present conditions dropping to a year-low and the difference between “jobs plentiful” and “jobs hard to get” narrowing to the smallest since early 2021.
The labour market is displaying notable weakness. The ADP National Employment Report for September was a major setback, showing private employers shed 32,000 jobs, with job creation losing momentum across most sectors. Furthermore, for the first time since the start of the pandemic, there are now more unemployed people in the US than there are job vacancies (job openings), suggesting that labour demand is cooling off. Compounding this, the grim official jobs report for August showed a mere 22,000 gain, with June being revised down to a loss of 13,000. These figures strongly suggest the economy is cooling rapidly.
Adding to the instability is the government shutdown, which introduces immediate economic drag. The Congressional Budget Office estimated the 2018/2019 partial shutdown reduced annualised real GDP growth by 0.4% in Q1 2019, while the 2013 lapse lowered growth by as much as 0.6%. The current shutdown, with threats of mass federal layoffs and disruption to services like E-Verify, will further erode confidence and hit private businesses; the 2013 shutdown cut an estimated 120,000 private-sector jobs.
This combination of weak consumer confidence, a softening labour market, and government instability creates an environment of elevated risk and uncertainty. In times like these, investors typically seek safety. Undervalued, high-quality sovereign and quasi-sovereign bonds like those held in the EPIC Fixed Income Strategy, become attractive. These assets offer capital preservation and predictable income in the face of economic turbulence, acting as a crucial defensive counterbalance to potential volatility in other asset classes.
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Chloe
03/10/2025