When the US government enters shutdown mode, the ripple effects reach far beyond the Beltway. Investors worldwide are bracing for a data blackout, a delayed Federal Reserve decision and renewed questions about America's fiscal resilience.
Data Blackout & Fed Dilemma
Key agencies like the Bureau of Labor Statistics have paused operations, postponing vital indicators such as the monthly jobs report and the Consumer Price Index. Without fresh data, the Federal Reserve's upcoming policy meeting is clouded in uncertainty.
"I'm certainly struck by how much political capital the Trump administration seems to be willing to spend on reforming, if I can put it that way, the Federal Reserve," says Luke Bartholomew, deputy chief economist at Aberdeen Investments. His remark underscores worries about political dysfunction and its economic fallout.
Market Worries & Global Fallout
The shutdown comes on top of a US sovereign debt downgrade and an ongoing tariff regime. "It's the cumulative, compounding effect of all of these events — the US credit rating downgrade, the changes to the trade regime and now the shutdown — that worry me," warns Brian Shipley, chief investment officer at Coldstream Wealth Management.
Neil Birrell, chief investment officer at Premier Miton, adds that a prolonged shutdown could dampen global risk appetite and stall the fragile recovery in emerging markets.
From GDP to Consumer Confidence
Oxford Economics estimates a partial shutdown chops 0.1 to 0.2 percentage points off weekly GDP growth. Consumer sentiment also takes a hit: the 2018-19 shutdown coincided with a seven percent drop in the University of Michigan's confidence survey, notes Lauren Goodwin, economist and market strategist at New York Life Investments.
On the Ground: Federal Workforce Impact
About 750,000 federal employees face furloughs. In a stark escalation, threats of mass firings could permanently erase positions and extend the economic pain for families and local economies.
What to Watch Next
- Release dates for postponed economic data
- Signals from the Federal Reserve's policy meeting
- Consumer spending and retail reports
- Progress in Washington negotiations
As global markets grapple with uncertainty, keeping these indicators on your radar will be key to navigating the weeks ahead.
Reference(s):
cgtn.com
