With the United States government on the brink of shutdown, worries are spreading through economists and investors. The government is unable to open its doors at this very moment. This is an unfortunate reality that the Rockefeller Morning Briefing does not expect to change anytime soon. In a matter of days, the federal government could be back open for business. Questions about how long the shutdown will go on surely still linger.
As it is now on October 27, there is still a gap between 98.99 and 99.49, which will likely grow by October 31. Economists of all stripes are most concerned about what a long-term shutdown will mean. Without widespread reopening we risk extremely damaging negative GDP growth rates for the fourth quarter. In ordinary times, such a situation would spark panic and concern regarding the long-term health of our economy.
Pessimists step up their warnings that the US economy is due for a collapse given headwinds like these. They vehemently claim that the basics are there for continued growth, citing a strong economic backdrop. In international comparisons, the US and the UK are among the very last major economies to slash interest rates. Taken as a whole, this trend would indicate a great deal of confidence in their respective local economic situations.
The uncertainty of these times has wreaked havoc on financial markets, too. The dollar’s fate has been closely tied to yield movements. If investors continue to be complacent and think that all is well, this will make it worse. This sentiment is echoed by an unnamed analyst who noted, “Despite jitters over valuations and market concentration, the bull market has strong underpinnings that encourage risk-taking: the Federal Reserve’s easing of financial conditions, the AI-driven boom in capital expenditures, and a supportive economic backdrop.”
Compounding these problems are changes to life as we know it. The pressure to end the shutdown is increased by news of flight cancellations and delays at airports. The Bureau of Labor Statistics (BLS) has already suspended data collection due to the shutdown. This has created confusion around the typical mid-July release of the Consumer Price Index (CPI) for this interval.
At the same time, scheduled economic releases from other major countries could impact market sentiment. On Thursday, all eyes will be on the UK’s GDP figures. In the meantime, Wednesday’s marquee releases are Japan’s current account and Germany’s ZEW economic survey. The rest of today’s calendar is completely clear. With poor trading forecasts for the remainder of the week, traders could be in for a highly volatile environment.