Bracing for Government Shutdown: Markets, Jobs & FOMC Expectations

Core Viewpoint - The potential government shutdown is imminent, and its duration will significantly impact the economy and markets, particularly regarding data releases from the Bureau of Labor Statistics [2][3]. Market Reaction - Current market reactions are relatively muted as investors have experienced similar shutdowns in the past, which were often resolved quickly [5][13]. - The S&P 500 has shown resilience, trading below its 20-day simple moving average (SMA) for only three days since April, indicating a strong uptrend [7][10]. Economic Impact - A short shutdown (7-10 days) may have minimal economic impact, but a prolonged shutdown could disrupt data releases, affecting Federal Reserve decisions [3][4]. - The bond market is showing signs of concern regarding fiscal discipline and the direction of federal debt, which could be exacerbated by the shutdown [15][16]. Earnings Outlook - After the shutdown, attention will shift to the upcoming earnings season, with expectations for healthy earnings per share (EPS) growth revisions, potentially in the double digits for this year and next [6][9]. Political Dynamics - There is increased concern about the political dysfunction and its implications for fiscal responsibility, particularly if the administration considers firing employees rather than furloughing them [14][15].