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Fears of a stock market crash are rising as a possible government shutdown looms. Some portions of the federal funding will expire as early as March 1 unless lawmakers reach funding deals or sign an extension.
Department of Transportation services, food stamp programs, and housing assistance for millions of families are currently on track to run out of funds on March 1. The rest of the federal funding expires on March 8, affecting the Departments of Defense and State, border security operations, the Department of Justice, the FBI and health officials.
Lawmakers have hinted that a temporary extension of spending may be necessary to avoid a partial shutdown. Congress has already approved three of those continuing resolutions since September 30 as lawmakers continue to fight over budget provisions.
As things stand, House Republicans have created a virtual gridlock, demanding concessions on issues such as LGBTQ rights, abortion, national security and immigration. A possible deal appears to have been ruled out Sunday night.
“Unless Republicans get serious, the extreme Republican shutdown will endanger our economy, increase costs, reduce security and cause untold pain to the American people,” the Senate majority leader said. Chuck Schumer wrote in a letter to his Senate peers.
Will a government shutdown cause a stock market crash?
The idea of a government shutdown is a worrying proposition when it comes to the stock market. In fact, if federal funds ran out, consumer spending would likely suffer, something that would eventually hurt stocks.
Now, congressional budget debates are pretty standard procedure in many ways. In fact, it seems that lawmakers flirt with a government shutdown every year as part of the federal budget process.
Lawmakers can usually avoid a government shutdown, even if just barely. The last government shutdown occurred from December 22, 2018 to January 25, 2019, a total of 35 days. This was the The longest closure in forty years..
While it is too early to definitively say whether Congress will reach a compromise in time, many analysts currently agree that funding is unlikely to run out without a replacement or extension. Event forecast website Kalshi estimates a roughly 20% chance of a shutdown before March 4 and even stipulates that any shutdown before July could last only a few days.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com. Publication Guidelines.
