A looming U.S. government shutdown, set to begin this weekend and possibly extend for weeks if lawmakers can’t reach funding agreements for the upcoming fiscal year starting October 1, could have severe consequences for financial markets, reported Reuters. Delays in releasing crucial economic data could lead to market volatility, compelling investors to turn to alternative data sources to assess the economy’s direction.
A government shutdown would disrupt various government services, including the release of significant economic data, such as highly influential employment and inflation reports that can impact global equity and bond markets.
Clifton Hill, a global macro portfolio manager at Acadian Asset Management, warned, “If government data releases are suspended, this will increase volatility and decrease visibility, at a time when forecasting is already challenging. Markets will face even greater uncertainty, affecting Federal Reserve rate decisions over the next three to six months.” Hill noted that investors would have to rely on non-governmental economic data and surveys to make assumptions in the absence of official government releases.
Key government data releases in the next two weeks, such as jobless claims, unemployment figures, and inflation data, are critical in influencing monetary policy decisions.
Jeffrey Roach, chief economist at LPL Financial, emphasized that market volatility could result if investors and policymakers lack timely data updates, particularly concerning employment and unemployment data, given the current economic stage.
A government shutdown could potentially delay the October 6 payroll report and other essential releases, which might lead the U.S. Federal Reserve to adopt a more cautious stance when assessing the economy, according to Roach.
James Knightley, chief international economist at ING, noted that a shutdown could disrupt the flow of data the central bank relies on to support interest rate hikes. This might bolster the case for the Fed to maintain interest rates at their current levels in November.
Peter Vassallo, a foreign exchange portfolio manager at BNP Asset Management, acknowledged that delays in economic data are an unavoidable challenge, forcing market participants to rely more on private measures temporarily. As a result, market reactions may be less immediate when data is eventually released.
Additionally, a government closure could impact companies looking to go public, as federal regulators might struggle to process filings for initial public offerings and other transactions. This could affect investor confidence and market performance, as highlighted by NYSE Group President Lynn Martin.
A government shutdown would disrupt various government services, including the release of significant economic data, such as highly influential employment and inflation reports that can impact global equity and bond markets.
Clifton Hill, a global macro portfolio manager at Acadian Asset Management, warned, “If government data releases are suspended, this will increase volatility and decrease visibility, at a time when forecasting is already challenging. Markets will face even greater uncertainty, affecting Federal Reserve rate decisions over the next three to six months.” Hill noted that investors would have to rely on non-governmental economic data and surveys to make assumptions in the absence of official government releases.
Key government data releases in the next two weeks, such as jobless claims, unemployment figures, and inflation data, are critical in influencing monetary policy decisions.
Jeffrey Roach, chief economist at LPL Financial, emphasized that market volatility could result if investors and policymakers lack timely data updates, particularly concerning employment and unemployment data, given the current economic stage.
A government shutdown could potentially delay the October 6 payroll report and other essential releases, which might lead the U.S. Federal Reserve to adopt a more cautious stance when assessing the economy, according to Roach.
James Knightley, chief international economist at ING, noted that a shutdown could disrupt the flow of data the central bank relies on to support interest rate hikes. This might bolster the case for the Fed to maintain interest rates at their current levels in November.
Peter Vassallo, a foreign exchange portfolio manager at BNP Asset Management, acknowledged that delays in economic data are an unavoidable challenge, forcing market participants to rely more on private measures temporarily. As a result, market reactions may be less immediate when data is eventually released.
Additionally, a government closure could impact companies looking to go public, as federal regulators might struggle to process filings for initial public offerings and other transactions. This could affect investor confidence and market performance, as highlighted by NYSE Group President Lynn Martin.
