The IRS sent half its workforce home mid-audit season, hedge funds are bailing on U.S. stocks for Europe at the fastest clip in months, and Morgan Stanley threw open the crypto doors to everyone. Meanwhile, as you’re waiting on hold for literally anyone at the IRS, $3.17 billion flooded into digital assets, and gold smashed past $4,079. The government shutdown, tariff threats, and institutional crypto adoption all collided in one month that could shape the rest of the year and beyond. So, it’s time to adapt and get on top of things.
Half the IRS Just Got Furloughed: Your Tax Deadlines Didn’t
The government shutdown sent nearly half the IRS home. That means only 39,870 workers remain to run the entire U.S. tax system through April 2026, while facing October deadlines, a massive compliance backlog, and new legislation to implement. Not to mention, the agency already burned through $13.8 billion of its Inflation Reduction Act funding to keep this skeleton crew working.
Good Luck Getting Anyone on the Phone
Fund managers need answers ASAP. Quarterly filings are due, year-end planning is heating up, and the people who handle specialized investment structures just got furloughed. The AICPA begged Treasury Secretary Scott Bessent to pause compliance actions and grant penalty relief, but even if that happens, getting a private letter ruling or resolving an audit question means joining a very long line. The National Treasury Employees Union warned that wait times and backlogs will spike as the shutdown drags on. Half the workforce walked out mid-task with four hours to wrap up their desks, so those technical questions about partnership allocations or cross-border transactions are sitting frozen in someone’s inbox.
Plan for Delays, Document Everything
Automatic penalties keep ticking even when nobody’s around to review reasonable cause arguments. So document every filing attempt, every unanswered call, and every email that bounces back. Talk to your tax advisers about which deadlines might qualify for relief versus which need immediate attention despite the chaos. It’s anyone’s guess how long this shutdown will last, so treating it like a quick blip may cost you later.
Hedge Funds Ditch US Equities, Go Shopping Overseas
Thanks to tariff drama with China and the government shutdown, hedge funds just bailed on U.S. stocks and loaded up on global industrials. During the week ending October 10, they flipped net-short on domestic equities for the first time in seven weeks while simultaneously gorging on global industrials at the highest volumes in six weeks. The S&P 500 also suffered a 2.8% loss over five trading days, its worst sell-off since April.
More Context on the Domestic Dump
The retreat wasn’t total, though. While funds turned bearish on U.S. broad market indices, they kept selective positions in individual stocks they still believed in. Goldman Sachs flagged the net-short positioning as a sharp reversal after nearly two months of domestic bullishness. With trade friction heating up again, funds decided hedging the indices was smarter than riding out the storm. The strategy: Build defensive positions against broader market exposure while cherry-picking companies positioned to weather the storm. They’re not abandoning the U.S. market, just betting it gets worse before it gets better.
The Global Shopping Spree
That capital had to land somewhere, and Europe became the destination of choice. Funds flooded into global industrials with Europe capturing the biggest slice, followed by developed Asian markets, while U.S. industrials got left in the dust. They chased electrical equipment makers, machinery producers, aerospace and defense contractors, and passenger airlines with nearly all positions betting on rising prices. Goldman also pegged trading volume at five-year highs while tech stocks kept their crown as the most net-bought sector globally, holding long positions in four of the past five weeks.
Wall Street’s Crypto Bouncers Just Clocked Out
Morgan Stanley scrapped its wealth requirements for crypto access. Effective October 15, any client can buy into crypto funds through their advisers, not just the $1.5 million-and-up crowd. Retirement accounts are fair game now too.
There Are Still Velvet Ropes
Don’t mistake this for a free-for-all. Morgan Stanley built an automated system to flag clients getting too deep into digital assets. It’s capping initial allocations at 4%, with adjustments based on whether you’re preserving wealth or chasing growth. Lisa Shalett, the firm’s chief investment officer for wealth management, put it plainly in an October 1 report: Crypto is “speculative and increasingly popular” — something many investors want to explore, but not something for everyone.
What’s Actually Available
Advisers are offering BlackRock and Fidelity bitcoin funds right now, with more options coming and the ability to request specific exchange-traded products from the approved list. This follows Morgan Stanley’s announcement last month that it would add BTC, ETH, and SOL trading at E-Trade as part of a broader institutional shift. The doors that used to stay locked are swinging open, and for alternative investment firms watching, the barriers are falling faster than anyone expected.
When Trade Wars Meet Buy Orders in Crypto
Adding even more context to the above, digital asset funds pulled in $3.17 billion the week ending October 10 in the face of U.S.-China tariff headlines. Bitcoin snagged $2.67 billion of that haul and pushed exchange-traded product volumes to a record $53 billion. Year-to-date inflows now sit at $48.7 billion, already crushing the entire 2024 total.
Volume Tells the Story
October 10 became the busiest trading day ever recorded, hitting $15.3 billion in turnover. Bitcoin prices dropped 7% after the tariff news broke, but volumes jumped to $10.4 billion that same day. People were buying and selling aggressively, not running away. Ethereum grabbed $338 million through the week before investors pulled $172 million on Friday alone — the biggest single-day exit among major assets. Traders clearly treated ETH as the riskier play when things got choppy. Solana and XRP brought in $93.3 million and $61.6 million, respectively, though momentum cooled ahead of their upcoming ETF launches.
Institutions Doubled Down
U.S. spot Bitcoin ETFs added $2.71 billion last week and now hold $158.96 billion in assets. Good for 7% of Bitcoin’s total market cap. October 6 delivered $1.21 billion in inflows, the second-biggest day since spot ETFs launched, followed by $875.6 million on October 7. October 10 was the only blip, recording a tiny $4.5 million outflow right after Trump dropped the 100% tariff bomb on Chinese imports. The pattern here matters: Institutional players kept buying through the chaos, not fleeing from it.
The Oldest Trade on the Block Just Got Hotter
Crypto wasn’t the only asset getting love from nervous money. Bank of America just raised its 2026 gold forecast to $5,000 an ounce and Goldman Sachs $4,900 as the metal punched through $4,079.62, a fresh all-time high. Gold has already risen 50% in 2025, its strongest year since 1979, and the latest China tariff threats add another tailwind.
Why Analysts Keep Raising the Bar
The math is simple: Demand keeps climbing. Bank of America expects investment flows to jump another 14% into 2026, while central banks are projected to snap up 80 metric tons this year and 70 next as they reshuffle reserves. Randy Smallwood of Wheaton Precious Metals told Bloomberg he sees $5,000 within 12 months, maybe $10,000 by 2030. The Fed’s quarter-point cut last month sweetens the trade too. Lower yields make bonds less attractive compared to gold, which doesn’t pay interest but holds its ground when everything else shakes. Traders are already pricing in another cut soon.
Two Roads to the Same Destination
Here’s the thread connecting crypto inflows and gold’s moonshot: Both are catching the same spooked money. Tariff mayhem, inflation jitters, political noise, pick your poison. Gold hit record highs the same week Bitcoin ETFs logged their second-biggest inflow day ever. Different assets, same motivation. Alternative investment firms watching these flows should notice the pattern: When macro conditions get messy, capital moves fast. Whether investors grab digital coins or physical metal depends on their risk tolerance, but the flight from traditional markets is unmistakable right now.
You Need a Team That Gets It
Half the IRS is furloughed, hedge funds dumped U.S. equities for Europe, Morgan Stanley let retail into crypto, and both gold and digital assets are catching the same fear trade. If October taught us anything, it’s that waiting for normal to return is a losing strategy. Here’s what we at Michael Coglianese CPA, P.C. can do for firms like yours:
- Audits & Assurance: Explicitly built for alternative investment firms, not retrofitted from corporate templates. We know your compliance requirements inside out and deliver clean audits that hold up when regulators come knocking.
- NFA Regulatory Compliance & Consulting: The NFA and CFTC don’t mess around, and neither do we. If you’re dealing with commodities, we’ll keep you compliant without the usual regulatory stress eating into your day.
- Tax Preparation: You can’t get anyone at the IRS on the phone right now. Good thing we already know how to handle your K-1s, performance allocations, and whatever complex structure you’re running.
- Audit, Tax, and Regulatory Support for Crypto Entities: Crypto just went from niche to normal overnight. If you’re trading, mining, or running a fund, we know the rules (even the ones they’re still writing).
- Industry-Specific Advisory: We’ve spent decades serving alternative investment firms, from hedge funds to private equity to real estate. Get personalized solutions from advisors who speak your language and understand your specific challenges.
Contact us today to learn more.