The United States federal government is currently in a state of shutdown. This follows negotiations fizzling between a half-dozen key lawmakers who were unable to come to consensus on a funding package. The big three — top Democrats and Republicans — are deadlocked. Consequently the federal government does not have the budgetary means to maintain baseline functions. Now, federal agencies are shutting them out. Though planned for only three days, market expectations indicate the shutdown could continue much longer than that.
The Senate will be out for Yom Kippur on Thursday, and will not convene. Senators will have the first opportunity to come back and vote to approve the Bill on Friday. According to prediction markets, this shutdown may go on for almost two weeks. Investors are still fretting over the toll it will take on the economy.
President Donald Trump has since doubled-down on his willingness to support a shutdown. He cautioned that if the deadlock goes on, it may force long-term mass dismissals of federal employees. This announcement has further contributed to the rapidly increasing anxiety about our labor market, which is already showing early signs of a decline. The Labor Department recently dropped a major bombshell. This suspension impacts nearly every function like the release of the September nonfarm payrolls report that was scheduled for Friday.
As these improvements materialize, investors are working through an economic data blackout that will only make a cloudy financial picture that much harder to see. Despite these uncertainties, markets exhibited resilience recently. The Dow Jones Industrial Average climbed a tepid 43 points, or 0.1%. The broadly based S&P 500 added about 0.3%, ending at a record high, while the tech heavy Nasdaq Composite advanced about 0.4%.
Against the tide of market forces, major pharmaceutical companies have to a large extent enjoyed favorable headwinds. Importantly, Pfizer’s stock jumped when the Trump administration rolled out a contract that was in line with its own “most-favored-nation” drug pricing plan. Pfizer will introduce a new “direct to consumer” website named “TrumpRx.” Through this platform, the company will provide a number of its medications at lower-than-normal prices.
Investment expert Dan Niles told Axios on what brought us to this point. He thinks this will be a longer shutdown than past ones, such as the 2018 shutdown. He stressed that other measures could prove to be more important in telling the market’s performance.
“My belief is this shutdown could last even longer than in 2018 but that other factors will ultimately matter more such as 1) upcoming Q3 earnings being solid, 2) AI euphoria continuing with the Mag7 reporting solid qtrs and 3) the next Fed mtg on 10/29 where I expect the Fed to stay on its course to cut rates three times this year.” – Dan Niles
Niles took an upbeat view of the market prospects while acknowledging increased short-term volatility.
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