Markets lost their footing last week as several headwinds converged. A tech and AI sell-off, persistent inflation worries, and policy uncertainty loomed large against the backdrop of a 38-day government shutdown. Unsurprisingly, with consumer sentiment hovering near long-term lows, investors have turned decidedly more cautious.

 

Last week’s pullback didn’t just dent performance, it’s revealing deeper shifts in market behavior as we head toward year-end. Here are the major themes and narratives at play.

 

 

Stock Index Performance 

• The S&P 500 fell 1.63%. 
• The Nasdaq 100 declined 2.36%. 
• The Dow Jones Industrial Average slid 1.04%.

 

 

Consumers Turn Gloomy

 

The University of Michigan's November consumer survey took on outsized importance amid scarce government data.

 

• The Consumer Sentiment Index plunged to 50.3, the lowest reading since June 2022 and just above the all-time record low. The decline of about 6% from October was broad-based, driven by a sharp deterioration in assessments of current personal finances and expected business conditions for the year ahead.
• The persistent government shutdown and worries about inflation and jobs were cited as major drivers of the deterioration.
• Sentiment dropped across all age, income, and political groups, but those with significant stock market holdings (the wealthiest third by invested equity assets) reported somewhat more optimistic views due to strong asset performance, revealing a sharp “K-shaped” dynamic in economic confidence.
• The Current Economic Conditions index at 52.3 signals consumers’ sharply negative feelings about their present finances and ability to make major purchases, reflecting a 17% drop in reported personal financial strength.​
• The Consumer Expectations Index fell to 49.0, indicating widespread pessimism about the year ahead — including future income, job prospects, and broader economic health — with an 11% decline in expectations for coming business conditions.​

 

 

The Week Ahead 

• The government shutdown has delayed crucial data on inflation, employment, and retail sales, forcing investors to rely on private and alternative gauges instead. This lack of transparency amplifies market sensitivity to every unofficial data point, earnings report, and survey release that could influence Federal Reserve expectations or risk sentiment.
• The "AI bubble" narrative and sharp tech valuation reset have taken center stage, especially following significant losses in the "Magnificent Seven." Whether high-growth tech and semiconductor names stabilize or deteriorate further will set the tone for broad market risk appetite.
• With the Senate advancing a government shutdown bill on Sunday night, we will see how this develops throughout the week. It will likely take time to reopen the government, with the Senate still needing to pass the legislation and the House of Representatives needing to reconvene for a vote if the legislation passes the Senate as expected.

 

Markets face fragile investor psychology, elevated event risk from missing official data, the tech sector’s stability, and ongoing Fed uncertainty. In this environment, capital preservation and active risk management are our focus.