Government Shutdown and Volatility Likely as September Comes to an End
Here's what investors need to watch as betting markets reflect a 67% odds of a government shutdown on Wednesday.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
The indexes are trading higher on Monday morning as President Trump is scheduled to meet with Congressional Democrats to discuss a deal to avoid a government shutdown on October 1. Despite the meeting, Polymarket prediction market shows a 67% chance of a shutdown, which is down from 77% on Friday.
Bonds (TLT) , Bitcoin (IBIT) , and gold (GLD) are all trading higher on the potential for increased uncertainty, but the S&P 500 is also indicated up 0.5%. Investors are looking ahead to economic news, including the September labor report, which will likely solidify a series of Fed interest rate cuts. There was some uncertainty this past week about the impact of inflation on the Fed, but the slowing of the economy has become a more significant concern and is driving the policy decisions at this point.
If the government shuts down, then the monthly jobs report on Friday will be delayed. One of the key issues of a shutdown is that it may allow the Trump administration to cut government jobs, which the Democrats are currently blocking.
The likelihood of elevated volatility this week is very high, as there is great uncertainty about the impact of a shutdown. In addition, there will be confusion about economic data, and that will make it less clear what the Fed may do.
For now, the market is optimistic about both a dovish Fed and good economic growth. Investors shrugged off a few days of corrective action last week with the market bouncing back nicely on Friday. All that has helped to relieve some of the overbought technical issues, but there are still plenty of overbought charts.
The other significant issue on the horizon is the start of the third-quarter earnings season. There are still a couple of weeks before the big guns start to report, but anticipation will build next week when banks start to report.
The good news is that there is still plenty of speculative trading, and individual stock-picking is working well. Traders are looking for opportunities and helping to create them with higher levels of aggressiveness.
Watch for shutdown news to create some big swings this week.
At the time of publication, Rev Shark had no positions in any securities mentioned.
