The credit markets are shifting, and a critical, often overlooked, trend is gaining momentum: Liability Management Exercises (LMEs) and distressed exchanges. In a post-zero-rate world, understanding these "quiet defaults" is essential for evaluating the resilience, return potential, and governance of your credit portfolios. Dive into our latest insights to navigate this evolving landscape.
The government shutdown dominated U.S. market narratives at the beginning of November. The shutdown continued to cause a blackout on important data and weigh on investor sentiment. On November 12, the shutdown ended after a record 43 days. President Trump signed a bill that would fund key U.S. government departments through the end of the 2026 fiscal year. The rest of the government is funded via a short-term measure until January 30, 2026.
The Federal Open Market Committee's (FOMC) minutes from October highlighted concerns about inflation, labor market risks and divisions over future rate cuts. A key quote from the minutes read, “There was no consensus on monetary policy at the next meeting, with some members favoring a pause and others supporting additional cuts.” Markets initially pared back the odds of a rate cut in December. However, yields fell over the week, following comments from the NY Fed President that a cut in interest rates remains possible.
Following the U.S. government shutdown, the delayed U.S. payrolls report for September showed a significant gain of 119,000 jobs, exceeding the consensus estimate.
However, the U.S. unemployment rate ticked up to 4.4% from 4.3%.
The recent resolution of the government shutdown included a bill that will fund key U.S. government departments through the end of FY 2026. This means that another potential shutdown could loom in the new year.
Additionally, with this resolution, Senate Republicans agreed to a vote by mid-December on the expanded Affordable Care Act (ACA) subsidies that are due to expire at the end of 2025. While it is unlikely any changes to the ACA subsidies will be enacted, it will be something important to watch, as any changes to policy here could be impactful on the 2026 U.S. government's fiscal balance.
The Supreme Court began reviewing the legality of tariffs imposed under the International Emergency Economic Powers Act (IEEPA), with several justices expressing skepticism over the executive’s broad use of emergency powers. Prediction markets now assign a 70-80% chance of the tariffs being struck down. [1]
However, any ruling is expected to have a limited near-term market impact. Refunds would be partial and delayed, and Treasury financing adjustments are likely to be manageable.
We're excited to share the strategic acquisition of FlowStone Partners, a move that will profoundly enhance our Wealth offerings. This acquisition expands innovative access to private equity secondaries for individual wealth investors and boosts our private markets investment capabilities for institutional clients.
As Diya Luke, Global Head of Investments, shared, this is a "bold venture in the future of private equity secondaries investing." Nimisha Srivastava, Head of Investments, North America, added, "this strengthens our ability to deliver best-in-class solutions for individual and institutional investors alike - helping more people achieve stronger long-term outcomes."
Thank you for taking the time to read this edition of What To Watch, brought to you by Jon Pliner, global chief investment officer; Jim Neill, senior director; Nikki Latta, senior associate; Garrett Goniea, senior associate; Madison Rugh, analyst and the WTW Investments team.
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