Financial markets immune from US govt shutdown

On 1 October, the United States federal government officially entered a shutdown after Congressional Democrats and Republicans failed to agree on a funding package.

- Keagan Marcia

Government shutdowns occur when Congress does not pass or the president does not sign - the appropriations Bills or continuing resolutions for the new fiscal year, which begins on 1 October.

Unlike a default, a shutdown primarily affects nonessential federal employees, who are either furloughed or work without pay until funding is restored.

While politically disruptive, shutdowns are generally short-lived and have historically had limited economic impact.

The current deadlock, largely centred on disagreements over health care subsidies, underscores the challenges in balancing federal budgets while maintaining government operations.

These events rarely derail financial markets, highlighting the resilience of equities and other asset classes.

However, shutdowns are not without consequences; they can affect the labour market, consumer confidence and the release of key economic data.

Understanding both the historical performance of markets during shutdowns and their broader economic implications is critical for investors navigating the current environment.