Market Outlook: Analysts Warn of Volatility Ahead Amid Record Highs

US markets are near record highs despite the government shutdown, driven by solid earnings, consumer resilience, and policy clarity. Analyst Carol Schleif warns of impending volatility, valuations remain stretched, and market participation is broadening. Global equities outperform US stocks, and technology, communication services, and industrials are favored. M&A activity is expected to increase as companies seek stronger positioning.

US markets have reached near-record highs despite a partial government shutdown, driven by robust earnings, resilient consumer demand, and policy clarity. The Dow Jones Industrial Average closed at 46,441.10, the S&P 500 at 6,711.20, and the Nasdaq Composite at 22,755.16, marking the fourth consecutive session of gains [1].

The health-care sector led the rally, surging 2.7% after a historic agreement between Pfizer and the White House to lower drug prices in exchange for tariff relief [2]. Biogen jumped 10.9%, Thermo Fisher Scientific climbed 9.4%, and Eli Lilly gained 9% [3]. The technology sector also performed well, with chipmaker Micron rising 8.9% [4].

Despite weak jobs data, the market remained resilient. The ADP private-payroll report showed a 32,000 job loss in September, below expectations of a 50,000 gain [5]. Investors shrugged off the slowdown, betting on Federal Reserve interest-rate cuts. The 10-year Treasury yield slid to around 4.10% [6].

The government shutdown, which began as Congress failed to agree on a budget, added uncertainty. Economists predicted delays in the monthly jobs report and other data, complicating the Fed’s rate decisions [7]. Historically, shutdowns have had limited market impact, but the S&P 500 gained more than 10% during the 2018–19 closure [8].

Analysts have raised their year-end 2025 S&P 500 targets. RBC Capital Markets raised its target to 6,250 and kept its earnings forecast at $258 per share, citing expectations for 1.1–2% U.S. GDP growth [9]. Goldman Sachs increased its 2025 target to 6,800 with 6- and 12-month return expectations of 5% and 8%, pointing to a dovish Fed and resilient earnings [10].

Global equities have outperformed US stocks, with technology, communication services, and industrials favored. M&A activity is expected to increase as companies seek stronger positioning.