Amidst his typical sabre rattling stances on issues impacting the United States, President Donald Trump is also making loud waves threatening a government shutdown the week before Christmas if his budgetary demands are not met by Congress. As congressmen and senators look to make funding deals to avert such an action, Trump is insistent that monies for his border wall along the southern border with Mexico be made available to complete the project. Fortunately, market analysts are confident that the feared shutdown won’t gravely harm markets unless it lasts an inordinate amount of time.
Analysts are watching especially closely to determine the impact such a shutdown might have on foreign markets even as the dollar improves after a cooling in US-China tensions. Overseas, forex broker recommendations in Australia, Asia and Europe are meant to soothe investor concerns after watching happenings in the United States. Analysts say those concerns are misplaced, however, as prior government shutdowns dating back to US President Gerald Ford have caused only relatively small blips to market values.
For instance, Ford’s 12-day shutdown tumbled market values a total of 3.4 percent. Successor Jimmy Carter’s 14-day shutdown the following year followed with a 3.2 percent down. But in more recent years, Clinton’s 7-day and 21-day shutdowns actual led to market rises, as did Obama’s 17-day shutdown and Trump’s prior 3-day and 1-day shutdowns. Those S&P gains during recent shutdowns were unexpected but could be replicated if this current shutdown threats comes into fruition.
Even a slight stumble, however, shouldn’t cause panic in foreign exchange markets as any possible shutdown is likely to be short-lived and some type of positive outcome is expected between the Republicans still in control of both houses and the volatile US President. Certainly, none of the leaders involved want to see this extend into 2019, with Democrat poised to take control of the House.
The Congressional Research Service in the US analyzed that a week of government shutdown costs about 0.1 percent loss in GDP growth, which is considered to be negligible, and also not enough to negatively impact either domentic or foreign markets for more than just a very short period of time. Concerns should rightly hinge, however, on a shutdown that lasts more than just a few days, or longer than the planned Christmas break. At this time, that threat doesn’t seem imminent.