Market Volatility as Possible Government Shutdown Threatens US Economy
As the possibility of a government shutdown becomes increasingly likely, the impact is starting to be visible in the performance of the stock market. The uncertainty this brings is causing a dip in stock futures. However, despite this recent downturn, the stock market is on track to end the month on a positive note.
The Impact of the Shutdown on the Market
Typically, a government shutdown does not significantly affect the market. However, the current situation is making investors nervous due to other prevailing economic factors such as a slowing job market, the risk of inflation and high stock values. The looming shutdown could potentially lead to a reassessment of the US credit status, which had already been downgraded earlier this year.
An alarming comment from the Vice President recently revealed the likelihood of a shutdown. He indicated that the deadlock was due to a lack of cooperation from one political party. This has only added to the growing concerns.
Effects on Labor and Economic Data
The potential shutdown has also put the release of the September nonfarm payrolls report on hold. This report, along with other critical economic data releases, provides crucial insights into the economy's trajectory. The delay in this data could result in increased uncertainty and, consequently, impact the market volatility.
This uncertainty was further amplified by the President's warning that a shutdown could lead to widespread layoffs of federal employees.
Experts Weigh In
Market experts have expressed their views on the situation. One prominent portfolio strategist suggests that while a shutdown may not have a lasting impact on the economy, the longer the uncertainty persists, the higher the risk it poses to the market.
Another expert from a well-known knowledge firm shares a similar viewpoint. He believes that while the market has anticipated a shutdown, investor concerns will rise if the situation drags on for more than two weeks, as this could delay the release of important economic data.
Market Performance Amidst Uncertainty
Despite the uncertainties, major US stock indexes continue to perform well, staying close to record highs as the month draws to a close. The S&P 500, which has seen an average drop of 4.2% over the past five years, has risen by over 3% this month.
In addition to this, the Dow Jones Industrial Average has seen a gain of 1.7%. The tech-centric Nasdaq Composite has outperformed the other two indexes with a 5.3% increase in September.
As the third quarter of the year ends, the broad-based index has risen by 7.4%. The Nasdaq is set to register a nearly 11% quarterly gain. The Dow has seen a 1.7% increase over the quarter, marking its fifth consecutive positive quarter.