How would markets react to a US government shutdown?

The Federal Reserve’s decision to cut rates last week was really “a risk management tool” in the face of softer economic data, including a weaker job market, says Deepak Puri, the Private Bank’s Chief Investment Officer for the Americas. “But it was not all about the Fed last week”, Deepak says, pointing to policy decisions in the U.K., Japan, and Canada. “A lot to digest from the global central banks last week.”

Looking ahead, a shutdown of the US government remains a possibility, while lawmakers remain divided on a budget that could pass a Senate filibuster. But Deepak says that markets may not react strongly even if that happens. “The interesting thing is that the markets tend to look beyond the shutdown”, Deepak says, noting that one occurred during the first Trump administration without rattling stocks. “Even though it took a lot of space in regard to the news, the markets actually had a pretty impressive rally.”

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