Equity Market Melt-Up Cools as Government Shutdown Looms

On the Brink of a Shutdown

Congress has until October 1 to reach a deal to avoid a government shutdown, an unlikely scenario given the cancellation of a meeting on Thursday between President Trump, Senate Democratic Leader Chuck Schumer, and House Democratic Leader Hakeem Jeffries. Republicans have proposed voting on a “clean” seven-week continuing resolution, which would provide additional time for negotiations on full-year spending bills. Democrats insist they will not pass a spending bill unless it includes concessions on health care, including the rolling back of the White House’s Medicaid cuts, and an extension of the Affordable Care Act insurance subsidies. In addition to furloughing workers during a potential shutdown, the Office of Management and Budget (OMB) announced last week that executive agencies should consider permanent cuts to federal employees working in discretionary areas “not consistent with the President’s priorities.” In terms of odds of a shutdown, the betting markets are pricing in a 63% probability (as of Sunday evening) of the government shutting down on Wednesday.