After extending into this last November, the longest government shutdown in US history sent ripples through the economy. Uncertainties swept across Wall Street and negatively impacted markets, as the release of key economic data came to a halt. Paired with the rising concerns of an AI bubble, many, including the Student Investment Fund (SIF) and personal investors across Loyola, were affected.
Arising from fears that hype and enthusiasm have inflated AI and tech company stock price levels rather than actual profitability, the AI bubble has raised concerns among investors, including the SIF. Diego Pa-Ortiz ‘26, one of the SIF’s co-presidents, commented, “Another issue is that the index S&P 500, comprised of the 500 leading companies across US stock exchanges, has in recent years, become overwhelmingly weighted by really large tech companies such as NVIDIA, Microsoft and Apple.” SPY, an ETF that tracks the S&P 500 index, bears a substantial weight within SIF’s portfolio. If the AI bubble were to “pop,” this would cause a sharp market pullback and consolidation of the AI/tech industry, a potential economic recession and could play out negatively for the SIF. The SIF has therefore focused on staying away from being overweight in the AI industry.
Concerns over an AI bubble and overall market concerns have become increasingly fueled by the recent government shutdown, as October data, most notably the CPI and jobs reports, will not be fully released or at all. Pa-Ortiz added, “If we don’t have the economic data there to make reasonably informed decisions, then that tremendously handicaps us, or at least that’s how the thinking goes. We won’t know enough to more accurately predict when there’s going to be a big change that changes how the market reacts. For the SIF, the jobs report is very important, as it tells us the state of
unemployment and the economy. The idea behind this is that we can get a decent view of the health of the broader economy, and how people are doing right now.”
In response to heightened market volatility, the SIF has made efforts to stabilize its portfolio, including rediversifying the fi
xed income/bond segment. This shift reflects the SIF’s overall focus on aligning its diversification with inflation expectations, which directly impact bond yields, and has resulted in a greater emphasis on emerging-market bonds. The SIF also recently added ASML and Leidos to its holdings. These investments will provide exposure to high-growth sectors while also offering a “safety net,” given both companies’ strong financial track records and long-term growth potential.
Consistent in its philosophy, the SIF continues to uphold a conservative investment approach, a reflection of its responsibility for managing a portion of the endowment. This conservative stance is key to safeguarding the endowment against potential market corrections, especially given the disproportionate influence of mega-cap tech stocks on the S&P 500’s performance.
Outside of the Student Investment Fund, many Cub investors, including Junior SIF member Kai Beck ‘27, have been affected by the broader
macroeconomic conditions and the government shutdown. Beck shared, “Personally, my portfolio is heavily invested in public sectors like weapons and defense, given my lifelong interest in them. During the shutdown, any company that had anything to do with public funding did not take the shutdown well.”
As the end of the year approaches, the SIF and student investors alike hope for a steadier future while also monitoring the economy’s reaction to the December Fed Meeting, paying attention to the additional effects from the shutdown and the overall health of the AI industry.
