U.S. Government Shutdown Gets Temporary Reprieve


The longest U.S. government shutdown in history is finally over, for now anyway. Stock markets weren’t particularly bothered by this either way though as it turned out.

Donald Trump no doubt has distinguished himself among U.S. presidents for several things, but the one thing that really stands out is his resolve, or as some people may describe it, stubbornness.

Forestalling signing Congressional spending bills is a popular tactic for presidents to look to use their power to get what they want, and we all know what President Trump wants the most. He has far from given up though on the wall on the border with Mexico that was a central piece of his election platform.

After a 35-day standoff, Trump eventually accepted the original deal proposed by the Democrats, although the issue has far from been resolved yet. The temporary part of this means that this bill will only provide full government funding until February 15, when another bill will be required.

Trump has even more in store for us if a deal to provide the $5 billion he is looking for to fund his wall with Mexico isn’t reached by then. The chances of the Democrats giving in to his wall demands by then are felt to be virtually non-existent though, so we’re almost certainly in for another showdown of some sort.

Trump has told us that his next move would be to declare a national emergency and use this to get the money he needs. While this move may seem far out there, and this is something we would not normally expect a president to ever even consider, we’re talking about Donald Trump here, and there is at least a chance that he may follow through with this plan, maybe even a good chance.

This Might Indeed Be a Temporary Solution

There is also the option available for Trump to refuse to extend the bill that has been passed by Congress today, where we could be right back where we started. Congress has been pretty stalwart in their resisting to give in to Trump, and Trump of course has been up to the task as well in sticking to his guns, so while we may think that Trump was the first one to flinch and has given in, don’t count on it.

800,000 furloughed federal employees are the real winners here, many of which have struggled to make ends meet after missing a couple of pay checks. Hopefully this will serve as a lesson for them to better prepare for the next time, where the importance of having access to enough liquidity to get through a little over a month without getting paid is pretty important indeed, whether that be though tapping into one’s savings or at least having the ability to borrow enough to get through these layoffs.

Another opportunity to practice this craft may come to them sooner than later, next month actually, and although Trump hasn’t made clear what his intentions may be if he is unable to play the national emergency card successfully, another shutdown may be an option, and perhaps a complete shutdown this time.

The partial nature of this shutdown didn’t end up swaying Congress very much and must be seen as a failure in the Trump camp. Perhaps they will realize this and bring out bigger guns next time, the kind that do require more concern and attention than this rather ho-hum shutdown that we just saw.

Stock Markets Weren’t Concerned Much with All This

Although it’s not always easy to tell what is moving markets, there was no real indication that stock markets paid much attention to all of this. This was really driven home today, as there was no real response to the news in the markets, and although they did close higher, this news did not even suffice to even put much of a scare into the highs they reached earlier in the day.

This partial shutdown did affect markets somewhat, as some of the government reports that markets rely on were absent during this time, but this did not cause any great concern and there really wasn’t a good reason why it should have. Markets move from bigger picture events, things like how the economy is going as a whole, and this shutdown just didn’t have much effect on the big picture.

We had another up day in the stock markets though, following up on Thursday’s mixed results. The three major stock markets averaged about a 1% gain on the day, keeping the comeback from the correction of late last year moving forward.

We are still a fair bit away from October’s market highs, with the S&P still needing 259 points to catch up, or about 10% of today’s value. Given that it took almost 3 months to fall as far as it did, a lot of ground was made up over the last month, and we are actually a month exactly into the recovery, which began December 26.

That’s right around the time that the government shutdown got underway, and the S&P 500 has risen from 2416.62 on the day before it came into effect to 2664.76 today, a gain of about 10%. When the market goes up 10% in a little over a month while this has been going on, and doesn’t really rebound at all when it ends, that tells us that this wasn’t much an event in the markets as some might have thought it may be.

This story is far from over though, and Trump will very likely get the opportunity to have the ball in his court again and perhaps even declare a national emergency if no deal is reached by the deadline, which if successful, would bypass the need for congressional approval for the money he seeks for his wall.

Trump speaks confidently about being able to do this, although experts are not so sure, but they are not ruling out the possibility of this working. National emergencies are supposed to be actual national emergencies of course, and it’s hard to imagine anyone thinking that the Mexican wall would be one, unless you are Donald Trump of course.


Editor, MarketReview.com

Monica uses a balanced approach to investment analysis, ensuring that we looking at the right things and not confined to a single and limiting theory which can lead us astray.