When it comes to government shutdowns, Wall Street has grown numb to Washington’s chaos. House Republicans are in disarray as they barrel toward a government funding lapse on Sept. 30. But financial analysts don’t expect it to rattle markets the way this year’s debt ceiling standoff threatened to. Shutdowns haven’t historically moved the markets a whole lot. An analysis by Raymond James found that since 1995 the S&P 500 has risen 3.2 percent on average during the funding gaps. An initial dip in both the markets and in economic activities is often made up by a bump that comes from an agreement to end the shutdown. Workers who are furloughed get paid later. “There’s certainly some lost output, to some extent, but we do see something of a rebound thereafter,” Wells Fargo strategist Gary Schlossberg told MM. Still, there may be some reasons to keep a more careful eye on markets this time around. If the government shuts down at the end of the month, it’s likely to collide with a host of other economic X factors — the auto worker strike, the resumption of student loan payments and high oil prices, to name a few. That creates “a little more uncertainty” around how markets might react this time, Schlossberg said. “This is taking place in the context of so many other potential body blows.” Adding to that uncertainty is the possibility of a protracted impasse on Capitol Hill. If lawmakers manage to pass a short-term continuing resolution to temporarily keep the lights on, it could set the stage for an extended shutdown as they hash out a long-term spending deal toward the end of the year. “If I’m telling my clients there’s something to watch for, it’s not this fight, it’s the next fight,” Raymond James Washington policy analyst Ed Mills said. But a volatile market could also help push lawmakers to get a deal done. “If there’s been any consistency in these debt ceiling [and shutdown] debates, … it’s been that both parties tend to react to turbulence in the financial market,” Schlossberg said. “That may be different this time around — the players are different — but if that’s the case, then that could be a safety valve.” Happy Thursday — What’s your take on the shutdown? Are you at an agency that’s preparing to turn off the lights? Get in touch: Zach Warmbrodt, Sam Sutton.
| 
