The US government is hurtling toward a shutdown as Democrats seek to use what little power they have to force Republicans to undo significant cuts to healthcare made by Donald Trump’s tax-and-spend bill. The standoff seemed to harden on Tuesday as the deadline drew near. While last-minute deals are always possible, what does a shutdown mean for investors, and what are the implications for US financial markets?
The main macro implications lie in the labor market and predictions for the path of interest rates. The Trump administration is threatening mass firings of federal workers, which if true would add to the tens of thousands of people it already fired this year and send jobless claims rising even higher in a troubled job market. As for those other markets, a shutdown that lasts could finally stick a pin in the extended bull run, which as in previous years seems untethered to reality. Here’s what to watch for if that shutdown reality bites.