At 43 days, the recent U.S. government shutdown was the longest on record, ultimately disrupting air travel and federal programs and services, while furloughing hundreds of thousands of federal workers. But from a market standpoint, the shutdown hardly seemed to register. Equity momentum continued, and neither the economy’s underlying trajectory nor expectations for the Federal Open Market Committee’s (FOMC’s) December 9–10 meeting appeared to be meaningfully affected.
Even with lumpy or delayed government data, we have firm understanding of where policy stands. The federal funds rate remains well above most estimates of neutral, real rates (nominal interest rates minus inflation) remain restrictive, and the Fed’s own projections already imply additional easing over the next several quarters.
Data Sources: Bloomberg, L.P., Federal Reserve, NBER
Data as of November 13, 2025.
Note: Shaded areas denote recession.
FEG believes the combination of moderating inflation, slower nominal growth, and elevated real policy rates supports the case for future rate cuts. The key debate is timing and pace, not whether the Fed ultimately eases.
While it did not derail the economy, the recent shutdown added a layer of risk to an already fragile growth backdrop. Episodes like this typically dent consumer confidence, delay spending, and raise uncertainty around capital expenditures and hiring decisions. Moreover, we saw an uptick in layoff announcements from prominent companies during the shutdown.
Against this backdrop, we expect the Fed to lean more heavily on private data, market-based indicators, and regional intelligence to fill gaps left by delayed official releases, so it will be interesting to review its updated Summary of Economic Projections, which the FOMC will release at its December meeting. So far, none of the non-governmental data sources suggest a re-acceleration in activity that would justify maintaining a restrictive policy for an extended period. If anything, they suggest the Fed may be increasingly focused on risks to growth and employment, keeping rate cuts on the table for December and into early 2026.
Fast approaching the end of his term as Chairman of the Fed, Jerome Powell will be handing the leadership reins over at the end of May 2026. Markets have already begun to price in the probability that his successor will be somewhat more dovish at the margin and likely more comfortable with lower real rates—and likely quicker to respond to downside risks to growth and employment. Even before a successor is formally named, we think investors are likely to assume that the new leadership will not want to keep monetary policy too tight once inflation is converging toward the Fed’s 2% target.
Moving ahead, we see a Fed that increasingly recognizes its current stance is restrictive, sees rising risks to growth, and is likely to exhibit a more dovish leadership profile. In that environment, keeping rates unchanged through 2026 would require a meaningful upside surprise in growth and inflation, rather than the muddle-through conditions we have observed to date. Consequently, an easing cycle is our base case, with any delay in December likely pushing rate cuts into the early months of 2026.
DISCLOSURES
This information was prepared by Fund Evaluation Group, LLC (FEG), a federally registered investment adviser under the Investment Advisers Act of 1940, as amended, providing non-discretionary and discretionary investment advice to its clients on an individual basis. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Fund Evaluation Group, LLC, Form ADV Part 2A & 2B can be obtained by written request directed to: Fund Evaluation Group, LLC, 201 East Fifth Street, Suite 1600, Cincinnati, OH 45202 Attention: Compliance Department.
This information is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may receive this presentation. Neither the information nor any opinion expressed in this report constitutes an offer, or an invitation to make an offer, to buy or sell any securities.
The information herein was obtained from various sources. FEG does not guarantee the accuracy or completeness of such information provided by third parties. The information in this presentation is given as of the date indicated and believed to be reliable. FEG assumes no obligation to update this information, or to advise on further developments relating to it.
Any return expectations provided are not intended as, and must not be regarded as, a representation, warranty or prediction that the investment will achieve any particular rate of return over any particular time-period or those investors will not incur losses.
Index performance results do not represent any managed portfolio returns. An investor cannot invest directly in a presented index, as an investment vehicle replicating an index would be required. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown.