We are now at the 3rd day of the US government shutdown. As of 12AM Eastern Time Saturday, the US government has failed to agree on a budget plan. Of course in reality, the main issue isn’t simply how MUCH will be spent, but rather what programs and agendas will be forwarded. Each party and factions within each party has expressed their particular concerns and forwarded their preferred legislation, but so far no agreement has been reached, with the most televised issue being that of immigration with the DACA program being the centerpiece.
The financial markets have so far responded fairly modestly to the news. This is not surprising, given that traders already anticipated this outcome. In fact, with the midterms being so close and the DNC looking to regain control of Congress, it is not surprising that we are seeing such a strong push on wedge issues such as immigration. In addition, given the RNC’s big win on tax reform last year, it is clear that strategically creating a delay in the implementation of the new tax laws should dampen the momentum that Republicans are likely to get as a result of US taxpayers footing a smaller tax bill overall this season.
Ultimately, we can expect this shutdown to last at least another week, even a few more weeks based upon developments over the weekend. The Senate is scheduled to vote to end the shutdown on Monday at noon, but it seems unlikely to expect a swift resolution given the degree of partisan bias we’ve seen in Congress since the 2016 election and also during the Obama administration. With these things in mind, we can expect the markets to be on edge but subdued until clear progress is made.