So now the Federal Government has been shut down by the impasse in Congress.
It appears that the U.S. stock market largely anticipated this and has to a degree discounted at least a short-term event. However, if this impasse persists right up to when the debt ceiling needs to be raised in 17 days, then markets will surely sell-off more emphatically. A short impasse has only a minor effect on the economy, but a long and protracted stalemate could do some real harm. The outcome is simply impossible to predict, however, all investors know that this is not the end of our democracy as we know it, this will be resolved; it’s just better sooner than later. As long as the fundamentals of our economy are not severely damaged, both the economy and stock market will get back on track.
That is why professional investors have been reluctant to sell, fearing they will over-react to what may prove to be a minor event. We are watching things closely, but agree that sitting tight seems to be the best policy for the time being.