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Analysis: Investor Confidence May Be Harmed By A Potential US Government Shutdown

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Billions OF Russian Funds Seized From Russian Oligarchs Will Be Given To Ukraine, US Authorities Announced Photo From: Atlantic Council

Investors stated that concerns about the economy through year’s end and beyond could increase if the U.S. government were to shut down at the end of September.

The majority of government programs’ current funding runs out on September 30. Large portions of government operations would shut down if Congress are unable to approve a new budget before then, which, according to Goldman Sachs event analysts, would slow U.S. economic growth by 0.2% for each week it continued.

It is believed that a partial government shutdown, which won’t affect vital services like the military or Social Security payments, won’t be as harmful to the economy as failing to raise the government’s debt ceiling, a scenario that Congress narrowly avoided.

The S&P 500 has only slightly increased during shutdowns in the past; according to CFRA Research statistics, the S&P 500 has increased throughout all shutdowns since 1976 by a total of 0.1%. In contrast, the impact of past shutdowns on U.S. equities has been minimal.

However, this time around, investors might be more sensitive to a closure. Failure to adopt a budget would draw attention to the political unrest and ratings agency Fitch’s decision to cut the U.S. credit rating in August, a decision that shook markets last month.

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Source: cbs News

If that happens, it will be the fourth shutdown in the past ten years, and three out of every five federal civilian employees will be laid off. The administration would continue.

Historically, shutdowns have been ended in a matter of days, but the 35-day shutdown in 2018 reduced real GDP by 0.1% and 0.2% in the fourth quarter of 2018 and the first quarter of 2019, respectively, according to the Congressional Budget Office.

Any shutdown would certainly last a long time, according to Paul Christopher, head of global investment strategy at the Wells Fargo Investment Institute, as Republicans and Democrats start to set their sights on the presidential and congressional elections that will take place next year.

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