Shutdown, Tariffs, Pharma Pricing Make for a Busy Start to the Quarter. What Matters.

(Anna Moneymaker/Getty Images)

Politics are overshadowing the start to the fourth quarter—we have a government shutdown, a new way for consumers to buy drugs, and a spate of fresh tariffs. But investors should focus on a healthy economy and what could derail it.

The shutdown will dominate headlines, but history suggests it’s a sideshow for stock markets, even with President Donald Trump’s threat of permanent mass layoffs. Equities have risen during more than half the previous shutdowns, and there’s little correlation to the length of the impasse.

A Trump initiative which looks more meaningful is the introduction of a new government-run website, offering reduced prices on prescription drugs. That sounds like bad news for pharma companies, but stock moves say otherwise. Pfizer and other drugmakers climbed on the announcement.

That’s because the real story of the so-called TrumpRX drug marketplace is that once again the White House’s bark was worse than its bite. Offering direct sales of products already discounted for Medicaid patients or largely covered by health-insurance plans is a small concession to stave off a larger threat of tariffs. And while Pfizer has had to commit to a $70 billion investment in the U.S., much of that was likely already planned.

The question is whether there will be similar parachutes available for producers of lumber, furniture and kitchen cabinets—the latest targets for import levies. While international trade deals will soften the impact in many cases, the threat of tariffs could still lead to raised prices. The stock rally is underpinned by confidence in the Federal Reserve cutting interest rates, but analysts at Gavekal Research warn protectionist trade policies and immigration restrictions mean inflation will “almost certainly” accelerate next year, testing the Fed’s willingness to keep easing.

Shrugging off political news has been a good strategy for investors so far and the shutdown doesn’t change that. But a collision between the White House’s tariff threats and the Fed’s aim to keep inflation down is still the biggest risk heading into the final months of 2025.

—Adam Clark

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Government Shutdown Starts. Federal Workers Face Cuts.

The government shutdown began after lawmakers failed to extend funding into November. The move means some 750,000 workers—about one-third of the federal workforce—could be furloughed without pay until the government reopens. President Donald Trump cast it as a chance to cut more and hurt Democrats.

• The daily payroll of those furloughed adds up to about $400 million, according to the Congressional Budget Office. Workers would get their back pay after reopening. Some workers, such as the military, could still get paid during the closure, while others like air-traffic controllers have to work but without a paycheck.
• Two labor unions representing federal workers have sued the Office of Management and Budget over its directive to federal agencies to draw up plans for mass layoffs. They told a California federal court that the Trump administration is threatening to dismantle essential federal services and functions.
• On Tuesday, Trump threatened to take “irreversible” measures in a shutdown. Referring to Democrats, he said, “we can do things during the shutdown that are irreversible, that are bad for them, and irreversible by them, like cutting vast numbers of people out, cutting things that they like, cutting programs that they like.”
• Still, the CBO said the impact on economic growth will depend on the length of the shutdown, noting that past funding lapses have resulted in small drags on economic growth. The 35-day shutdown that ended in 2019 shaved off $3 billion in real gross domestic product growth over the affected quarters.

What’s Next: The CBO expects that if a government shutdown persisted for several weeks, some private-sector entities would never recover all of the income they lost. Several economists have estimated that a shutdown would reduce GDP growth by 0.1 to 0.2 percentage points for each week it persists.

— Anita Hamilton and Megan Leonhardt

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Pfizer’s Cut-Price Drug Deal Could Become Industry Template

Pfizer’s deal with the Trump administration could become the template for the pharmaceutical industry as it races to avoid steep tariffs on imported drugs. Pfizer is cutting prices for branded prescription drugs sold to Medicaid, and will sell certain drugs at lower prices directly to consumers through a new federal website, TrumpRx.

• President Donald Trump and Pfizer CEO Albert Bourla said Pfizer will sell all its medicines to Medicaid at prices charged in other wealthy countries, and introduce new drugs at similarly low prices. In return it’s getting a three-year grace period to avoid the administration’s 100% import tariffs.
• For Pfizer, the reprieve will give it time to invest in operations in the U.S., with Bourla adding that Pfizer is committed to moving drug manufacturing on shore and to investing $70 billion in capital projects and research. Trump said similar deals with other drugmakers are coming.
• Pfizer committed to selling virtually all of its drugs currently on the market to Medicaid at “most favored nation” prices. Medicaid already pays lower prices than other payers for prescription drugs. For other payers, only newly launched drugs will have “most favored nation” prices.
• As for TrumpRx, it evokes a similar direct-to-consumer structure drugmakers have recently embraced for cash-paying consumers, lowering drug sticker prices while preserving revenue. Such sales skip intermediaries like pharmacy-benefit managers, which get rebates from drugmakers for offering their products.

What’s Next: It isn’t clear how helpful the changes will be to patients, because insurers won’t help cover the cost of direct-to-consumer drugs, and the copays that insured patients pay at the pharmacy counter are a small fraction of the list prices.

— Josh Nathan-Kazis and Janet H. Cho

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Investors May Be Underestimating Risks From Trump’s Tariffs

President Trump has been making more tariff threats lately, targeting everything from imported lumber products to movies filmed abroad. Some politics watchers say technology and media investors could be underestimating the impact—and scope—of levies facing those industries.

• Trump’s latest tariffs in recent days include 10% tariffs on lumber and timber imports and 25% tariffs on upholstered wooden furniture products and kitchen cabinets starting Oct. 14. Tariffs of 25% on imported heavy trucks and 100% on some branded pharmaceuticals start today.
• The administration is weighing tariffs on imported semiconductors, a big worry for the tech industry that Raymond James Washington policy analyst Ed Mills seems underappreciated. Apple’s commitment to invest $600 billion in the U.S. over the next four years may not be the ‘get out of tariffs free’ card some think.
• Trump’s threat to slap 100% tariffs on movies also raises interesting questions. Putting tariffs on a digital stream or electronic file could put the U.S. in breach of an e-commerce moratorium it had fought for at the World Trade Organization that expires next March and could invite retaliation.
• “Tariffing movies is a sledgehammer against an American crown jewel export” and risks a more expansive fight on intellectual property rights, says Barry Appleton, co-director of New York Law School’s Center for International Law. It also threatens an important source of revenue for studios.

What’s Next: Macro strategists like Mike Medeiros of Wellington Management say the greatest risk is that tariff threats could open U.S. companies to retaliation and revive concerns about digital service taxes like European countries have implemented, a reminder that “goods and services are still on the table.”

— Reshma Kapadia and Janet H. Cho

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Berkshire’s Potential Deal for OxyChem Seems Like a Buffett Win

Warren Buffett’s Berkshire Hathaway is in talks to buy Occidental’s petrochemical business for $10 billion, The Wall Street Journal reported. If the deal goes through, it would be the largest for Buffett’s conglomerate since its $13 billion deal for insurer Alleghany in 2022.

• It also means Berkshire would be buying an attractive business at what looks like a reasonable price, benefiting because the chemical business’ earnings are currently depressed like those of other chemical producers such as Dow and LyondellBasell Industries, hurt by weak margins.
• Occidental has projected that OxyChem would have about $850 million of pretax profit this year, down from $1.1 billion in 2024 and $1.5 billion in 2023. Buffett may be capitalizing on Occidental CEO Vicki Hollub’s desire to reduce Occidental’s sizable debt load, a legacy of previous debt-financed acquisitions.
• The company has paid off $7.5 billion of debt over more than a year from internally generated funds and asset sales. It is aiming to get down to $15 billion of net debt, and selling the chemical business could put it past the finish line.
• In 2019, when Hollub got in a bidding war with Chevron for Anadarko, Berkshire bought $10 billion of Occidental preferred stock with an 8% dividend yield and got equity warrants. The preferred stock has weighed on Occidental’s results, with annual dividend payments now running over $600 million.

What’s Next: Roth chemicals analyst Leo Mariani recently raised concerns about a sale of the chemicals business after the Financial Times reported that Occidental was in talks to sell it. He sees it growing in the coming years, and a $10 billion price tag didn’t seem to reflect its prospects.

— Andrew Bary

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Dear Quentin,

I’m in my early 30s. There was a tragedy in my family, which resulted in me receiving a large sum of money. I do not come from money and having a larger sum sitting there freaks me out. I settled on moving these funds to a money-market account with a guaranteed return. I am more comfortable with having this money now and I have a better support system—one that I trust.

I have $1.2 million sitting in a money-market account. It has been earning a guaranteed 4.5% monthly. My adviser has reached out to say that the percentage will drop significantly in the next month or so due to the end of the 12-month entry period.

Each month, I have been living better because of the interest. I would like to continue this each month, depending on the market, without touching the core investment. I am looking for suggestions on what type of investment strategies I should be looking at. Perhaps a CD ladder?

— Novice Investor

Read the Moneyist’s response here.

— Quentin Fottrell

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—Newsletter edited by Liz Moyer, Rupert Steiner, Callum Keown