Analysis-Potential US government shutdown could dent investor confidence
NEW YORK - A potential U.S. government shutdown at the end of September could add to worries about the economy going into year-end and beyond, investors said.
Investors might be more sensitive to a shutdown this time around, however. Failure to pass a budget would highlight the gridlock and political instability that ratings agency Fitch cited as a reason for its downgrade of the U.S. credit rating in August, a move that roiled markets last month. "You're going to get some reduction in government spending because that's the only way that these bills will pass,” said Jamie Cox, managing partner for Harris Financial Group, who is growing more bullish on defensive sectors such as healthcare. “That will create a meaningful slowing of the economy."
With only weeks to go before the deadline, the Republican-led House of Representatives has approved only one of those 12 bills. Spending and tax measures normally originate in the House before moving to the Senate.If it occurs, the shutdown would be the fourth over the last decade and would furlough roughly three of out five federal civilian workers. The government would continue making payments on Treasury bonds.
A deal that does not cut into the U.S. budget deficit may push yields on government debt higher, potentially extending a move that has wobbled stocks in recent weeks, said Christopher.
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