Wall Street's patience with US government shutdown could last a week, analysts say
Stakes will become higher if political gridlock persists as federal debt ceiling is approached
Wall Street took the partial shutdown of the US government in stride on Tuesday, but market analysts expected investor patience to run out if it lasts more than about a week, as a more worrisome battle looms in Congress over the federal debt ceiling.
After more than a week of declining stock prices over worries that political gridlock would result in a shutdown, investors bid up stock prices on Tuesday at the reality and took in stride closures that threw hundreds of thousands of federal employees out of work.
Opinions over when the political standoff over the budget might end and the extent of potential damage to the economy varied, but most commentators agreed around the idea that the impasse would keep the government closed for about a week.
Previous government shutdowns have generally been brief – usually just a few days – and the memory of a late agreement to avert the fiscal cliff last year explains to some extent the sanguine response thus far.
But if the shutdown lasts longer and the date when the US debt limit approaches, markets will be unsettled as the need to raise the federal debt limit could make negotiations more divisive.
Eric Lascelles, chief economist at RBC Global Asset Management in Toronto, estimated that every week the shutdown continued would shave one-tenth of a percentage point off gross domestic product in the fourth quarter.