The Record High Lottery: Why Your Portfolio Is a Government Hostage

The S&P 500 closed above 6,700 for the first time ever on Tuesday. By Thursday, it had kissed another record. The Dow did the same. The Nasdaq—naturally—joined the party. And in the middle of all this champagne-popping and confetti-throwing, the United States federal government shut down for the first time in seven years because Congress couldn't pass a funding bill.

Nobody cared.

Let me say that again: the government ceased operating, and the market shrugged like a teenager asked to clean their room. The Russell 2000 and Dow hit intraday records on Thursday. Palantir dropped 7.5% on battlefield system flaws, sure, but the indices kept grinding. Tom Lee—the same Tom Lee who called this year's bull run—came out swinging with a 7,000 S&P 500 target by December, adding helpfully that investors "would not lean bearish because of shutdowns."

Here's what we're being asked to accept: that a government shutdown—an event that historically tanks sentiment, freezes data releases, and generally makes everyone nervous—is now priced in as irrelevant. That AI hype is such rocket fuel that you can literally cancel the monthly jobs report (which did happen, by the way) and traders will just... buy more tech. That all-time highs during a fiscal crisis are normal, rational, and completely fine.

This is the environment we're in. Price discovery has been replaced by momentum worship. Risk assessment has been swapped out for "Well, it worked yesterday." The whole machine runs on one assumption: that nothing will break because nothing has broken yet.

Let's talk about what's actually happening. The indices are rising not because of earnings blowouts or revolutionary economic data—they're rising because liquidity is everywhere and there's nowhere else to put it. Bonds? The 10-year is hovering around the low-to-mid 4% range after the April chaos pushed it down to 3.86%. That's still not attractive enough when the Nasdaq is printing 0.4% days like it's dispensing receipts. Cash? Inflation is stubborn, unemployment is ticking up, and sitting in money markets feels like watching a parade from your living room.

So everyone's in equities. All at once. Buying the same handful of mega-cap names and AI proxies, convinced that if the music stops, someone else will be left standing when the chairs run out.

The government shutdown is instructive here, not because it's catastrophic on its own—it isn't—but because of what the market's reaction reveals. We've entered a phase where fundamentals are decorative. Congress can't fund basic operations, data releases vanish into the void, and the response from Wall Street is to buy more. This is not confidence. This is inertia dressed up as optimism.

And then there's the Fed, quietly sitting in the background like a parent who's given up enforcing bedtime. Earlier this year, they shuttered their dedicated crypto oversight program. In August, they announced they'd sunset the "novel activities supervision program" and fold everything back into normal supervisory processes. Translation: we're done pretending we can control this. The central bank that spent 2023 and early 2024 trying to regulate stablecoins and monitor crypto-asset risks has effectively thrown up its hands. They withdrew guidance on crypto activities for banks. They stopped pretending dollar tokens needed special supervision.

You know what that tells me? That the Fed is more worried about keeping the traditional system afloat than policing the fringe. That they're prioritizing rate cuts—three more expected this year, ranging from 50 to 100 basis points depending on who you ask—over everything else. That they've accepted the risk-on trade as permanent, or at least too big to stop.

So here we are. Records every other day. A government that can't keep the lights on. A Fed that's quietly retreating from oversight. And an investor base that's convinced the only direction is up because, well, look at the chart.

What happens when the music actually stops? When the shutdown drags long enough that economic data goes dark for real, when sentiment finally cracks, when one of these overextended AI names misses and the whole structure wobbles?

I don't know. But I know this: the market is priced for perfection in a world that's falling apart in slow motion. And that gap—between where we are and where we should be—gets wider every time someone hits "buy" on another all-time high.

Enjoy the records. Just remember: every lottery ticket feels like a winner until the numbers come up.