Market Rap: Talking Through the Week in Markets, Policy, and Power
Markets, Elections, Shutdowns, and AI Bubbles: The stories shaping the week
A lot is happening in the economy right now. From the historic government shutdown to new Supreme Court hearings on tariffs and a massive AI partnership shaking up the markets, today’s newsletter is a quick collection of the key stories shaping the week.
1. Government Shutdown (Day 36)
The shutdown continues, now entering its 36th day and officially the longest in U.S. history. Federal employees remain furloughed or are working without pay as political negotiations drag on. Economists warn that each additional week of closure slows GDP growth and erodes public trust in government institutions.
2. Tariffs and the Supreme Court
The Supreme Court meets today to hear arguments on the legality of Trump’s tariffs. Scott Bessent told Reuters he expects the Court to uphold the IEEPA-based tariffs. However, if the justices strike them down, the administration could pivot to Section 122 of the Trade Act of 1974, which permits the imposition of temporary tariffs of up to 15 percent for 150 days to correct trade imbalances. A lower court had previously ruled that Trump exceeded his authority by imposing broad tariffs under an emergency law. The Court, now with a 6-3 conservative majority that has sided with Trump in several major rulings this year, will determine whether those powers were used lawfully. Over the weekend, Trump defended his position, saying, “If we don’t have tariffs, we don’t have national security, and the rest of the world would laugh at us because they’ve used tariffs against us for years and took advantage of us.”
3. SNAP Update
There’s some good news for SNAP recipients. The Trump administration announced on Monday that it will use USDA contingency funds to issue partial benefits for November after two judges ruled that the SNAP pause was unlawful. Recipients will receive roughly half of their normal amount, since the administration will not draw from additional reserves. Distribution will also be delayed as states must reprogram their systems to handle the change. Officials further clarified that the federal government will not reimburse states that choose to use their own funds to support residents. For context, the average monthly SNAP benefit is about $187 per person.
4. AI and the Stock Market
Artificial intelligence continues to drive market optimism. OpenAI and Amazon have signed a $38 billion, seven-year agreement under which Amazon Web Services will provide infrastructure for OpenAI’s workloads, the companies announced Monday. The deal begins immediately and underscores how partnerships in AI infrastructure are fueling stock-market momentum and shaping long-term investment narratives.
On Tuesday, stocks fell under pressure from declines in artificial intelligence-related names like Palantir, as investors grew increasingly concerned about valuations in the bull market-leading shares. Palantir shares fell nearly 8% despite beating Wall Street’s third-quarter estimates and issuing strong guidance driven by its AI business. The stock, up more than 150% this year, now trades at over 200 times forward earnings, fueling concerns that the AI boom may be turning into a bubble.
5. Election Coverage
This is the first major election since Trump returned to office, and the pundits are treating it as a signal for the midterms.
Mamdani won his election, becoming mayor of New York City, beating Como. Some say this is proof that the Democratic Party is leaning hard into its next-generation progressives. Abigail Spanberger in Virginia and Mikie Sherrill in New Jersey, centrists, won their races. The future of the democratic party and its message needs to take shape before the midterms.
Market Rap is a quick summary of the economy that is designed to keep you informed on what’s happening in markets, policy, and business. If you found this helpful, share it with someone who wants to stay ahead of the curve. We would love to hear your thoughts on this format. Drop a comment.
Im a little bothered by the corporate partnership/consolidation. I know microsoft has a lion share or openai equity. But, my real concerns come from the recent AWS crash. If major failures happen like this imagine shipping the workload of all of Chatgpt to AWS. I am not saying they can't handle it far from it. I am actually starting too see oligopoloy murmurs. I just want want more competition for cloud services at that level. Big tech seems very incestuous lately and I worry for the smaller consumers.
The Palantir example really ilustrates how sentiment can override fundamentals. SNAP faces an even tougher situation where both sentiment and fundamentals are working against it. The ad market softness combined with competition from TikTok means investors have little reason to stay patient with elevated valuations.