Analysts believe that there is a 40% chance of a government shutdown at the end of this week, as the House of Representatives intends to vote on Tuesday.
A divided Washington could lead to a partial government shutdown after midnight Friday, but analysts are optimistic for now that the Republican-run House and Democratic-controlled Senate will be able to agree on a stopgap funding measure that prevents a shutdown.
Negotiations are unfolding this week between US lawmakers after ratings agency Moody’s lowered its credit rating outlook for the country to negative from stable at the end of last week, citing in part its doubts about the federal government’s ability to implement effective fiscal policies.
Over the past weekend, House Speaker Mike Johnson, the Louisiana Republican who became speaker just three weeks ago, unveiled a two-step measure to avoid a shutdown. His “graduated continuing decision” aims to extend government funding for some agencies and programs until January 19, and for others until February 2.
The House Rules Committee is scheduled to make its decision late Monday afternoon, and the full House is scheduled to vote on it Tuesday. The Biden White House criticized Johnson’s plan as a “non-serious proposal,” while Senate Majority Whip Chuck Schumer, a Democrat from New York, promised last week to “continue talking with Republicans about finding a way forward to avoid a shutdown that both sides support.” “.
Here are some assessments from analysts Major US stock indexes SPX DJIA COMP were mostly higher on Monday, as investors braced for key inflation data and gauged the possibility of a close.
The federal government is funded through midnight Friday because former House Speaker Kevin McCarthy worked with House Democrats to pass a 45-day funding bridge on September 30. McCarthy’s maneuvers angered some hard-line Republicans, who then led a campaign to oust him.
• “We still think the probability of a government shutdown on November 18 is about 40%, which is higher than other observers in Washington, but still unlikely. … Our sense is that Speaker Johnson is on a honeymoon with… His caucus is coming to an end, but we think he still has enough runway to get a “clean” continuing resolution to finance the government through January through the House. … At the highest level, we don’t think this close should be viewed as a material event for investors. Because it does not touch the third line of the debt ceiling and any lost economic activity will be made up after the inevitable deal. — Isaac Boltanski and Isabel Pandorov of BTIG, in a note
From the MarketWatch archives (September 2023): What stock investors need to know about the US government shutdown
• “We still see relatively close prospects this week
Low (less than 40%) Some Democrats are expected to support the package, although expectations remain ambiguous. The Republican two-step decision reinforces our view that it is in the political interest of Republicans to avoid a shutdown and that Rep. Johnson likely has the good faith and conservative credibility on the right side to sell a compromise that Democrats also support. . However, the gamble is being postponed until the first quarter of 2024, rather than resolving the standoff over spending levels and priorities. – Benjamin Salisbury at Haight Capital Markets, in a note
• “(We) don’t expect the government to shut down this weekend. …The Johnson Republican bill, while it doesn’t achieve the spending cuts that fiscal hawks want, does at least give the House Freedom Caucus (HFC) a win in Relates to the details of the funding process. Leadership-driven, year-end sweeping bills have become a bogeyman of sorts for conservatives, who hate both loud headlines and missed opportunities to get input into pushing funding cuts and policy riders. Johnson’s proposed proposal would postpone debate Funding to next year, eliminating the chance of such a collector being imposed on them at the Christmas deadline. —Andrew Lucai of Beacon Policy Advisors, in a note
From the MarketWatch archives (September 2023): Here’s how the US government shutdown could affect you, from food aid to getting your passport