US Federal Government Shutdown
You may have seen in the news that the US has been unable to reach an agreement on the Federal budget and the US government will be in partial shutdown from 1st of October.
What is a shutdown? Effectively around 800,000 US federal government employees will go on leave without pay until the politicians can stop bickering over who is to blame and fix the problem.
Below we provide our view on the potential impacts to you, the markets and the US economy.
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- Historically, US government shutdowns have been a non-event for investment markets with the average shutdown lasting around 10 days and the share market falling around 1.4%.
- The US has to raise its debt ceiling, which is currently around $17 trillion dollars, in order to fund the federal government going forward. They have raised this ceiling 79 times since 1940.
- The impact on the US economy should only be minimal, as long as a resolution has been implemented within a reasonable time frame. The outlook for the US economy is still good going into 2014. However at some point in the future the US needs to stop borrowing and start reducing government debts.
- We see any short term market volatility as an opportunity for you to potentially increase exposure to quality growth assets at a lower price.
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We will continue to watch this situation closely and keep you updated. If you have any questions or would like to know more please contact the team at Aspirations.