US stocks were already rattled by recent concerns about new tariffs that could force the US economy into recession at the end of 2025.
Investors are now faced with another challenge: the possibility of a government shutdown. The US Congress must approve funding for the government by midnight on Friday to avoid a shutdown.
Before the funding bill can become law, it must be approved by both the House of Representatives and the Senate.
The authorisation, however, has only come from one source – the government. This leaves investors wondering if there is a real shutdown coming and what this could mean for their investments on the stock exchange.
What US stock prices have historically done during shutdowns
The US stock market is known to be resilient in the face of shutdown fears.
According to the data of Carson Investment Group, S&P 500 is often in green even during periods of stagnation and has an average gain over 12% the following year.
Experts are generally convinced that the outcome of this election will not be very different.
In the past, shutdowns of government agencies have not had a significant impact on markets. This is most likely to continue,” said Ed Mills, a Raymond James Analyst in a Friday note.
Uncertainty in the economy caused by tariffs is still a major concern
Raymond James analyst says that while concerns about a government shutdown are not likely to scare investors in the past, “the uncertainty coming from Washington isn’t welcome at this time” given the market environment.
Many experts have warned of a possible economic slowdown due to the Trump tariffs.
Delta Air Lines, along with a number of other names from the retail sector have shown early signs that the consumer sentiment has been negatively affected.
These headwinds combined have caused the S&P 500 benchmark index to fall more than 10% since February 19 .
The experts are cutting their S&P500 year-end target
Amid the continuing rout of tech stocks, experts are becoming increasingly wary about the S&P 500.
David Kostin – a senior Goldman Sachs analyst – cited Trump’s tariffs as well as fears about a possible recession to lower his target for the year end of the benchmark index, from 6,500 down to 6,200.
In a note sent to clients, he stated that “the proximate cause of the decline in the markets is the increase in policy uncertainties largely tied to concerns over the outlook for economic growth and the unwinding in positions, particularly among hedge funds.”
Kostin’s target does, however, indicate that the S&P 500 benchmark index could rise by more than 12 percent from its current level.
Ed Yardeni is a well-known bull on the market who has also cut his year-end target in recent weeks.
How will the market react to this post-US government shutdown? The ICD first published this article
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