"K-Shaped Spending"

Consumers are adjusting their spending habits due to concerns about a recession, the government shutdown, and tariff uncertainty. There are 2 “camps” of people… The wealthy are continuing to spend, as they are being bolstered by stock market gains and increasing home values. Middle and low-income households are being forced to pull back on discretionary spending, along with essentials like gas and groceries. 

In response, companies are expanding both their premium offerings and value options. Some examples include Coca-Cola, which does both, while McDonald’s and Chipotle focus on value since lower-income traffic was declining. High-end hotel and airline companies are benefiting, while the budget brands are falling. The delayed CPI report will give clarity on inflation pressures and cost-of-living adjustments. 

Neelakandan, L. (2025, October 23). 'K-shaped' spending: Here's which sectors are showing bifurcation. CNBC. https://www.cnbc.com/2025/10/23/k-shaped-spending-sectors-showing-bifurcation.html

India to cut Russian oil purchases, U.S. to slash tariffs as they near trade deal: Indian media report

 Important Takeaways

• There would be a significant opportunity for Indian manufacturers as the United States intends to lower tariffs on Indian exports from about 50% to 15% to 16%.

• In return, India will increase agricultural access to the United States and decrease its imports of Russian oil.

The agreement is indicative of a larger geopolitical trend. Examination: This trade agreement between the United States and India marks a shift from transactional trade to a strategic partnership. Lower tariffs can significantly increase India's export potential, especially in industries such as machinery, textiles, and pharmaceuticals. 

It gives the United States influence over energy policy and fortifies relations with one of Asia's fastest-growing economies. The trade-offs are real, though. India runs the danger of increased import expenses and logistical difficulties when it reconfigures its refinery inputs by reducing its use of discounted Russian oil. Due to the possibility of American imports competing with Indian farmers in delicate markets, the agricultural concessions may potentially draw criticism from within the country. The long-term picture is encouraging, though. With careful management, this deal might strengthen U.S. involvement in South Asia and establish India as a central global manufacturing hub. More significantly, it highlights how trade agreements are evolving into tools of power alignment and diplomacy, rather than merely economic considerations.

Both countries stand to benefit. However, the success of this agreement will hinge on how well it is implemented and how effectively it reconciles domestic stability with strategic ambition by establishing a trade strategy that links financial incentives to strategic alignment. The action would increase domestic tensions over energy pricing and farm competition, but it might also promote India's "Make in India" objectives and increase exports.

Link

Gold and Silver Decline after Price Surge

 

The value of gold declined 3% after a decline of 6.3%, which is the worst rout for gold within 12 years. This was not too unsurprising as technical analysis showed gold being overvalued. This may mark a new level of certainty in the market, as people are getting used to some of the economic outcomes of the shutdown and fluid tariff rates.

Source: https://finance.yahoo.com/news/gold-silver-stabilize-massive-drops-231228968.html 

The Rising Role of Regional Trade

Global trade is slowing as protectionism and geopolitical tensions reshape the world economy. The IMF projects trade growth of only about 1.7% in 2025, far below global output. Ongoing tariff threats, especially between the U.S. and China, have led many countries to seek stability through regional and bilateral trade agreements. India, for example, is expanding its deals with Mercosur and the European Free Trade Association to reduce tariffs and boost investment. These partnerships offer businesses more predictable rules, new markets, and protection from global volatility. However, challenges like non-tariff barriers, complex regulations, and implementation gaps limit their impact. Still, as global cooperation weakens, regional trade pacts are becoming vital tools for economic resilience. The world is shifting from broad globalization to smaller, strategic alliances focused on stability and security in a more uncertain trade environment.

Family Offices Shift Toward Tech and Stocks Despite Global Uncertainty

 Family offices are continuing to look towards technology and equities despite the global uncertainty. According to Goldman Sachs 2025 Family Office Investment Insight report, 58% of surveyed family offices plan to heavily weigh technology in the next year. On the other hand, only 5% of families plan to be underweight. These investors currently hold about 31% of their portfolios in public equities and 42% in other alternatives like hedge funds. Even with market volatility, family offices continue to be consistent in their allocations. This is because of the strong performance of their equities and the increasing opportunities related to AI.

There have been many top market risks that have caused this turn. The possibility of a recession and geopolitical instability continue to be top risks as inflation concerns have slowly stopped. The generational capital has allowed them to act quickly and continue to capitalize on long-term opportunities where other investors cannot. 61% of family offices say geopolitical tensions are their main risk, showing their confidence in the markets ability to rebound. Also, cryptocurrency continues to gain attraction with almost a third of family offices investing in it which is doubled from 2021. Ultimately the consistent confidence of family offices shows their ability to balance risk and opportunity, proving that in times where it's hard to predict what is going to happen with the market their vision for the long term is their greatest strength.

Nearly 40% of Family Offices Plan to Raise Allocations to Public and Private Equity | Goldman Sachs

Government shutdown becomes the third-largest in history with no end in sight

    We are currently on Day 19 of the Government shutdown. This is what we know as of Day 19. There is currently no end in sight, after senators were unable for the tenth time to resolve the impasse in votes. There last vote took place Thursday, October 16th. This shutdown is the third- longest funding, lapse in modern history. The only shutdowns that are ahead of the current one are the shutdowns in 1985 and 2018-2019. In recent history, shutdowns are a new-coming phenomenon. Shutdowns first began in 1980. Senate Majority Leader John Thune sent home the upper chamber for the weekend after Thursday's vote.This means that the next vote will take place on Monday. The White House has been out of session since September 19th with no place to return until the shutdown is over. Thune's office stated that they will bring up the bill again this week that would pay federal employees and military services members who have continued to work during the shutdown. To pass this legislation it would require Democrats, who have blocked a long-term defense spending bill from advancing. 

To hit back at the United States in their trade war, China borrows from the US playbook

 China announced the latest edition to the global trade war as they will require export licensing for foreign companies shipping products containing at least 0.1% rare earth metals or that are made with Chinese rare earth technology. Making up about 90% of the supply, China is home to the largest concentration of rare earth metals. These seventeen different soft metals are utilized for the production of technology, automobiles, and many defense products. Trump recently announced an 100% tariff on China and restrictions on U.S. software exports. Experts are noted as viewing this as an escalation on China's part as they face severe economic pressure.

These policies show how neither economic system in China and the U.S. are strictly pure. Both are forms of government intervention in the economy. The U.S. is not a pure capitalistic society but imposes less nationalization of industries as China. China's requirement of licensing on foreign companies utilizing rare earth metals from China showcases a more strict form of government control over production. 

https://finance.yahoo.com/news/hit-back-united-states-trade-000105881.html

S&P 500 Futures Rise As Trade Tensions With China Seem To Be Cooling

US equities have seen a rise amidst hopes of easing tensions between the US and China. S&P 500 futures have risen 0.2%  in early asian trading hours. After threatening 100% Tariffs on Chinese imports Trump later redacted the statement claiming that tariffs that high would not be sustainable. Chinese officials have already told their global counterparts that tightened export controls, which were threatened earlier this month, will not affect normal trade flows between China and the globe. Strategists at Australias central bank are optimistic that tensions between the US and China will ease following a planned meeting between treasury secretary Scott Bessent and his Chinese counterpart He Lifeng. There are also rumors that Donald Trump and Xi Jinping will meet in the coming month as well, adding to equity traders relief and optimism that tensions between the two nations will ease. 

https://www.bloomberg.com/news/articles/2025-10-19/us-stock-futures-rise-as-china-trade-tensions-cool-markets-wrap?srnd=phx-economics-v2 

There's a shocking disparity between how high-income and low-income earners feel about the economy

     According to JP Morgan cost of living survey, their is a growing divide between how high-income and low-income earners in America perceive the economy. High-income earners are far more optimistic about the economic conditions, while lower-income workers are definitely less confident. The data from JP Morgan's survey suggest that we're in a "K-shape" economy, which is an economy where different groups experience very different outcomes.  This article also did a great job of highlighting a lot of statistics to back up its experience. 

    According to the survey, high-income earners had a confidence level of 6.2 on a scale of 1-10, while the low income workers had a average confidence level of 4.4. Along with this statistic 6 out of 10 high-income consumers said that paying bills have been easier to cover while 30% of lower income earners have said so showing a 30% gap in-between. This survey raises the question on what we could do to make life easier on these lower-income earners. With that being said with helping theme it requires a mix of short-term relief and long term changes that can make the economy more sustainable as well. 

This government shutdown could be the longest ever — maybe running until Thanksgiving. What might the economic damage be?

    The Current Government shutdown down which began in early October, is now being said could last until Thanksgiving. If that is the case, it would become the longest in US history. The shutdown stems from political disagreements over spending and health care funding. It is said that approximately 0.1%-0.2% is lost weekly. The white house is advising that if this keeps up, there will be projected losses between 15-30 billion in consumer spending if closure continues. 

    The Shutdown is not only hitting consumers but also federal workers, contractors, and the travel sector the hardest.  This is only delaying critical economic data and eroding public and business confidence within the US market. Although some of these conditions may be temporary, there may still be lasting economic damage. This could lead to layoffs, and potentially, government programs will be permanently disrupted.

https://www.msn.com/en-us/money/markets/this-government-shutdown-could-be-the-longest-ever-maybe-running-until-thanksgiving-what-might-the-economic-damage-be/ar-AA1OGHsz?ocid=BingNewsVerp

Consumers are taking a big hit from tariffs

     In 2025, global businesses are feeling the pressure from renewed U.S. tariffs, with S&P Global estimating the costs could exceed $1.2 trillion this year, which is a figure they believe might even be conservative. These tariffs, described as a kind of hidden tax on global supply chains, have created widespread disruptions through higher freight costs and logistics delays. While the White House insists that foreign exporters will shoulder most of the burden and that the tariffs are essential for promoting “fair trade” and bringing production back to the U.S., the evidence strongly suggests otherwise.

    S&P’s analysis shows that only about one third of the financial burden will fall on companies, while the remaining two thirds will land squarely on consumers. In other words, people are paying more for less as real output declines. The situation got even worse earlier this year when the administration removed the "de minimis" exception that allowed imports under $800 to bypass tariffs, a change that analysts call the “real inflection point” for how quickly costs have risen.

    As a result, profit margins are expected to shrink by about 64 basis points in 2025, marking a significant hit to global businesses. While there’s still some optimism that margins could eventually recover as companies adapt using technology and supply chain restructuring, the near term issues are clear. In the end, the trillion dollar tariff squeeze highlights a tough reality, despite political claims, tariffs rarely hurt only foreign exporters most of the cost ends up being paid by everyday consumers.

Source: https://www.cnbc.com/2025/10/16/tariff-costs-to-companies-this-year-to-hit-1point2-trillion-with-consumers-taking-most-of-the-hit-sp-says.html  

Trump administration agrees to deliver more student loan forgiveness

     The Trump administration has agreed to restart student debt forgiveness. Borrowers will have the option between two income-driven repayment programs that have been previously paused. The two are income-contingent repayment (ICR) and pay-as-you-earn plans (PAYE). The wheels started spinning with this because of a legal agreement between the US Department of Education and the American Federation of Teachers(AFT). AFT sued the Trump administration at the beginning of 2025 for supposedly illegally blocking or pausing student loan forgiveness.  

    Under the agreement, the Education Department will restart loan forgiveness for eligible borrowers in the ICR and PAYE programs, which currently serve over 2.5 million people. Borrowers receiving forgiveness in 2025 won’t owe federal taxes on the canceled debt, though that tax break ends this year. Overall, this is good news for students currently facing this issue, but uncertainties arise after 2028 when this will most likely be phased out. 

Article: Trump administration agrees to deliver more student loan forgiveness

Gold prices rose to a new record high this week, topping $4,300. Here's why.

This CBS news article talks about the rising price of gold. The price of gold has reached a new high at about $4,300 per troy ounce. The rise in price has been driven by broad economic and geopolitical uncertainties. A lot of these uncertainties have stemmed from Trump's trade wars. The increased demand for gold is from investors fleeing to “safe-haven” assets, because investors are seeking stability. Another reason for this surge is because of the weakening U.S. dollar and expectations of lower interest rates. Central banks are also increasing their demand for gold with geopolitical risks, such as the conflicts in Ukraine and Gaza. The U.S. government shutdown also adds to these anxieties, because key economic data has been delayed. 

This graph is from the article showing the dramatic increase in price per ounce

Link: https://www.cbsnews.com/news/gold-prices-high-whats-driving-surge/