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🧠 Corporate Overview

The longest government shutdown in U.S. history just entered week six, and markets finally cracked. After three years of algorithmic euphoria fueling AI valuations into the stratosphere, November delivered a reality check: when Washington can't function, neither can price discovery. The Nasdaq collapsed 1.9% Thursday as tech hemorrhaged $500B in 48 hours, the VIX spiked 8.3% to 19.50, and Bitcoin—that digital safe haven supposedly uncorrelated to everything—cratered below $100K for the first time since June.

This week's action had major bank CEOs warning of 10-20% corrections, with Goldman's Solomon and Morgan Stanley's Pick calling out stretched valuations while 42 million Americans lost SNAP benefits and air traffic controllers worked unpaid. The market's telling you something simple: when data goes dark and dysfunction becomes policy, risk premiums expand.

At Daly Asset Management, we don't play narrative games or pretend chaos is opportunity when it's just… chaos. We build systematic strategies that perform through cycles—not despite them—using data, not drama. No AUM fees. No fluff. Just alpha generation that works when markets actually matter.

💡 Stock of the Week: Berkshire Hathaway (BRK.B)

Ticker: BRK.B | Sector: Financials/Conglomerate | Market Cap: $1.03T | Yield: N/A

Why Now

While everyone panic-sold tech Tuesday, Berkshire climbed 2.6% as investors fled to size and stability. That's not luck—that's what happens when you own insurance float, railroads, utilities, and 34% operating profit growth in an environment where nobody trusts forward guidance because the government can't even publish jobs data.

The Fed's October rate cut brought the target range to 3.75-4%, but Powell threw cold water on December expectations, citing labor market uncertainty. Translation: when macro visibility collapses, Buffett's diversified cash machine becomes the adult in the room. Wall Street just hit its 14th failed Senate vote to reopen government. Berkshire doesn't need Washington's permission to compound.

Risks to Watch

Shares lag the S&P 500 over six months as sentiment favored risk-taking, and Buffett's stepping down as CEO by year-end creates succession noise. Energy exposure and potential recession drag could bite if this devolves beyond correction into contraction.

Verdict

We're long because it's essential. When the house is on fire, you don't chase smoke—you grab the fire extinguisher. BRK.B is that extinguisher, wrapped in $150B cash and real assets that don't need algorithm support to hold value.

📉 Market Snapshot (Week of November 3-7, 2025)

** Approximate EOW close.

The S&P 500 fell to 6,687, down 0.49% from the previous session, with the equal-weight index outperforming cap-weighted by 30 bps—classic risk-off rotation. Tech's 2% slide dragged indices while energy was the lone gainer at +1%. WTI crude trades around $59.64, struggling against descending channel resistance, while gold rebounded 0.9% to $3,966.65 after Monday's dip. The VIX at 19.50 isn't panic, but it's no longer complacent. Capital rotated defensively—bonds, staples, and Berkshire rallied while crypto, semis, and AI darlings bled.

📊 Market Commentary

The Shutdown Spiral: When Data Blackouts Become Decision Blackouts

The government has remained shut down for 38 days as Senate Democrats have blocked a continuing resolution 14 times, making this officially the longest shutdown in U.S. history. The consensus take? "Shutdowns always end; buy the dip." The intelligent take? This shutdown impacts 100% of appropriations versus 10% in 2018-19, with Goldman's Phillips noting it will have "the greatest economic impact of any shutdown on record."

The CBO pegs economic losses at $7B through October 31, but that understates reality. The Fed acknowledged the near-total blackout on government economic data during the shutdown complicates decision-making. When the central bank flying blind meets markets pricing perfection, something breaks. Thursday's action was that break.

AI Valuations Meet Gravity

Tech-heavy Nasdaq finished at 23,053.99, tumbling 1.9% due to weak performance of AI infrastructure giants. Palantir shed about 8% even after beating estimates and giving strong guidance, trading at 200x forward earnings. That's not a company—that's a religion. When Jamie Dimon warns of market corrections and David Solomon says 10-20% drawdowns are likely in the next 12-24 months, you don't fade the CEOs running trillion-dollar balance sheets.

The AI trade worked as long as liquidity kept flowing and narratives stayed intact. But 2025 is the worst year for announced layoffs since 2009, with tech shedding 33,281 jobs in October due to AI-driven restructuring. So we're firing humans to afford GPUs, then wondering why consumer spending looks shaky? Math doesn't work.

Fed's Murky Path Forward

The FOMC lowered the target range for the federal funds rate by 25 basis points to 3.75-4% on October 29, but Powell rattled markets by throwing doubt on whether another reduction is coming in December. He noted downside risks to employment rose in recent months, but also acknowledged inflation remains sticky at 3% in September.

Here's the bind: the Fed wants to support employment but can't see the employment data. Officials face the challenge of a data blackout accompanying the shutdown. Goldman Sachs Research still forecasts the Fed will cut in December, arguing labor weakness is "genuine," but markets priced near-certainty before Powell spoke. Now? Uncertainty premium expands.

Energy: The Stealth Outperformer

While tech imploded, the Energy Select Sector SPDR advanced 1% Thursday. WTI crude currently trades around $59.64 per barrel, facing rejection at descending channel resistance with potential downside targets at $56-57. But here's what matters: with 10% flight capacity cuts at major U.S. airports starting Friday due to air traffic controller shortages, demand destruction meets supply discipline.

Energy names aren't sexy, but they generate cash flow that doesn't require narrative support or liquidity injections. In an environment where clean energy is rallying 46% YTD, even traditional E&P names benefit from transition capital and inflation hedging.

Bitcoin's $100K Breakdown: The Canary Stops Singing

Bitcoin plunged below $100,000 on Tuesday for the first time in more than four months (CNBC), briefly touching $99,966. The price of Bitcoin has declined by 1.18% over the last 24 hours, currently trading around $100,611. The narrative? "Institutional adoption" and "digital gold." The reality? Cryptocurrency holders backed off the risk-on asset amid growing concerns about sustainability of stock valuations driven by the AI trade.

When crypto follows tech down—not inverse, not uncorrelated—it's not an asset class hedge. It's a risk asset with extra leverage. A $2.7 billion liquidation cascade eliminated leveraged long positions within 48 hours (Discovery Alert). "Store of value" doesn't liquidate that fast.

Sector Rotation: From Greed to Fear

November 4th saw the Nasdaq drop 1.80% and the S&P 500 fall 1.11%, heavily impacting technology and small-cap stocks (FinancialContent). Nine of 11 S&P sectors closed red. Consumer Discretionary and Technology Select SPDRs slipped 2.3% and 2%, while defensive sectors like staples and utilities held. The equal-weighted S&P 500 outperformed, down 0.7% while the market cap weighted index fell 1% (CNBC)—textbook rotation away from concentration.

This isn't a "healthy pullback" in a bull market. This is capital realizing that six stocks carrying the index to all-time highs while breadth deteriorates is a feature, not a bug—of late-cycle excess. When XLK (tech) is the only sector delivering both excess returns and accelerating momentum and that reverses, the whole thesis wobbles.

🧭 Tactical Map: Where to Lean In

• Defensive Quality Over Momentum: Berkshire, staples, utilities—boring wins when volatility spikes. Size and cash flow trump narrative.

• Energy for Inflation Hedge: Traditional E&P and MLPs offer yield plus pricing power if WTI stabilizes above $57.

• Fade Concentrated Tech: Salesforce down 5.3%, Palantir -8% despite beats. When winners sell off on good news, re-rate risk is real.

• Gold as Real Hedge: With inflation at 3% and gold rebounding to $3,966, central bank buying creates a floor. Unlike Bitcoin, it doesn't liquidate.

• Short Duration Until Data Clarity: Fed uncertainty plus shutdown chaos = keep dry powder for better entry points.

🔍 Theme to Watch: Dysfunction as Default

The 2018-19 shutdown ended after 35 days cost $3B in GDP. This one's already past that with double the economic footprint. Over 1 million federal workers are working without paychecks, another 600,000 furloughed, and SNAP benefits affecting 42 million Americans remain in limbo despite court orders.

This isn't partisan theater anymore—it's structural. When the Senate holds 14 votes on the same CR with zero progress, and both parties blame each other while markets slide, the logical conclusion isn't "they'll figure it out." It's "figure it out yourself."

That means positioning for a world where government can't be the backstop, data can't be trusted, and valuations need to stand on actual cash flow—not vibes. Companies with fortress balance sheets, real earnings, and defensive moats outperform when the house forgets how to function. Bet accordingly.

📅 Forward View: Week of November 10–14, 2025

Key Events:

• Monday-Wednesday: Continued shutdown negotiations; watch for Senate progress on bipartisan CR talks

• Thursday: Any delayed economic data releases if government reopens

• Friday: Potential FAA 10% flight capacity reductions deadline at 40 major airports

Technical Levels:

• S&P 500: Support at 6,550 (50-day MA); break below signals deeper correction to 6,400

• Nasdaq: Broke recent support at 23,120; next floor at 22,190 if selling accelerates

• 10Y Yield: Holding 4.0-4.15%; move below 3.9% would signal recession fears overtaking inflation concerns

Bottom Line: If shutdown extends past Friday, Thanksgiving travel chaos becomes the catalyst for bipartisan action. If it doesn't, markets may rally on relief—but don't confuse the absence of crisis with presence of opportunity. Positioning beats prediction.

💬 Final Words

The government has remained shut down for 38 days with 14 failed Senate votes and no end in sight. Markets pretended dysfunction didn't matter until it did. The week's message was simple: when governance fails, risk premiums expand. When data goes dark, price discovery breaks. When concentration meets reality, rotation hurts.

At Daly AM, we don't chase rallies built on hope or sell crashes driven by fear. We build systems that work through cycles because cycles are the only constant. No hidden fees. No narrative addiction. Just alpha generation when markets demand it most—like now.

Disclosures: This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Always conduct your own due diligence or consult with a financial advisor before making investment decisions.