No Government Shutdown Gives Relief to Investors

0

The unexpected move by the U.S. House Speaker, John Boehner, to announce his resignation from his position as speaker, significantly reduces the risk of an imminent government shutdown. This comes as good news for the markets, as it should remove one source of anxiety for investors as they walk into a week overflowing with uncertainty.

Additional Challenges

Boehner’s announcement of his decision last Friday that he would leave the House at the end of next month was seen as a sign that he would advance a government funding bill without adding any complicating factors which would cause a White House veto, hence reducing chances of a shutdown.

However, this was only one of the fiscal challenges for this week that still need to be resolved. The issues of long-term federal budget deal as well as a debt ceiling increase still have to be passed by Congress. The Speaker’s departure however, will not resolve these issues either between the two parties, or among Republicans.

This week will also see a host of Federal officials speaking including the Federal Reserve Chair, Janet Yellen and New York Fed President, William Dudley. The end of this week also sees the release of key economic data on housing, manufacturing and unemployment which could add to recent volatility in the markets.

Some Relief

Taking out at least one area of uncertainty could significantly help calm the U.S. stock market which is currently in the midst of a correction caused in part by the investors’ struggling with weakening earnings, uncertainties regarding the U.S. monetary policy, and China’s economic troubles.

Anxiousness expressed by many investors lately, could further increase the likelihood of a negative reaction on the market if a government shutdown is not prevented. While the S&P 500 stock index did gain close to 3.0 percent during the last government shutdown two years ago, that was in a significantly different economic climate than investors are currently experiencing

Share.

Leave A Reply