The ongoing government shutdown has become a news spectacle, with daily reporting all around the world. While the situation has dominated the headlines of both political and financial news, the impact on the stock market has so far been minimal. In fact, stocks have grown throughout the shutdown, with the S&P 500 benchmark index rising by almost 6% since December.
The situation could be about to change, and some analysts predict that market slides could be sudden and violent. An admission from the White House that the shutdown could bring GDP “close to zero” will not be ignored by investors when job data is released next week.
Labor Department Report Will be Key to Investor Sentiment
Early next week, the Labor Department will release details on job growth and unemployment for January. Any significant downtrend could rattle investors, and stocks could fall quickly.
The 800,000 federal employees who are furloughed or working without pay will not be counted in the unemployment report. Despite these workers not receiving paychecks in January, they are still technically on the federal payroll.
However, 4 million jobs in the private sector are directly linked to federal contracts. Affected workers could offset any statistical job growth and may raise the unemployment figure when calculated along with the rest of the job economy.
Why Has the Shutdown Been Ignored by Investors So Far?
While there’s no doubt that the shutdown will be costly for the economy, the actual data has so far not been presented. Next week’s Labor Department figures could be a turning point for the market. Depending on the numbers, investors may come to accept that the shutdown is bad for the economy and that it has the potential to derail the early progress of 2019.
If GDP turns out to be woefully low after the first quarter, then this could also cause market volatility later in the year.
The shutdown is now in its 35th day. Lawmakers failed this week to agree on a spending bill to reopen the government. This puts Congress back in a position where bipartisan negotiation will be the only way out. The White House has previously warned that the shutdown could persist for months – which is something that every investor should keep in mind when making financial decisions in the coming weeks.
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| The reports, research and newsletter are based on current and historical market data, as well as publicly available financial data.They are intended to be a starting point for investors. They do not provide every material fact about a company or industry, nor are they recommendations to buy or sell. The writers and the company make no warranties or representations as to the accuracy of these reports. You should NOT rely solely upon the information or opinions read in the content. Rather, you should use the content as a starting point for doing independent research on the independent analysis and trading methods in the content. The content is impersonal and does not provide individualized advice or recommendations for any specific reader or individual portfolio. By accessing this website you have agreed to our disclaimers and privacy policy. |
