Government Shutdown May Not Prompt Instant Recession, Say Economists
Portfolio Pulse from Piero Cingari
Economists and financial experts believe that a potential U.S. government shutdown would not immediately lead to a recession, but caution that the risk could increase if the shutdown is prolonged. Short-term shutdowns typically have a minor effect on the economy, but extended shutdowns could significantly impact economic growth. Analysts at Goldman Sachs noted that consumer confidence usually falls during shutdowns, but recovers in the following month. They also forecasted that a shutdown could reduce growth by about 0.2 percentage points per week, mainly due to federal workers not receiving salaries. However, growth is expected to rise by the same amount in the quarter following the shutdown. The SPDR S&P 500 ETF Trust (NYSE:SPY) fell nearly 6% this month due to the rising risk of a government shutdown.

September 27, 2023 | 6:17 pm
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The SPDR S&P 500 ETF Trust (NYSE:SPY) fell nearly 6% this month due to the rising risk of a government shutdown. While growth is expected to recover post-shutdown, the potential disruptions could leave lasting effects.
The potential U.S. government shutdown has increased uncertainty in the market, leading to a decline in the SPY ETF. If the shutdown is prolonged, it could further impact the ETF as it could slow economic growth and dampen consumer confidence. However, growth is expected to recover post-shutdown, which could potentially benefit the ETF.
CONFIDENCE 90
IMPORTANCE 80
RELEVANCE 100