Will the government shut down??
Sep 30, 2013
Political unknowns abound... Will Washington's disputes over the "federal budget" and "national debt" cause a shutdown? What will happen to the Farm Bill, which is already one year past due and an extension set to expire today? A government shutdown now seems more likely than it did Friday when we closed the markets. Especially after House Republicans voted late Saturday to fund the government ONLY if "Obamacare" was delayed for another year, basically upping the ante in their fiscal "showdown" with the Democrats and President Barack Obama. Remember, both the Senate and the White House have said they will NOT support any type of funding bill that cuts "Obamacare." Without a stop gap measure or some type of compromise being passed by midnight tonight, parts of the US government will start shutting down.
Talk is the Senate will be back in session today at around 2:00pm. It is assumed they will pass a Bill that keeps the government funded BUT does NOT suspend Obamacare in any form or fashion. This Bill will then be sent back to the House for a vote at around 7:00pm. If the House Republicans have been bluffing, a last second compromise will be reached and "shutdown" averted. If the House stands firm and Congress fails to pass a stopgap spending bill before funding expires at midnight tonight then a government shutdown is upon us... Hanging in the balance are 800,000 federal workers who would be sent home tomorrow. This obviously has the trade nervous.
Keep in mind even if a deal is reached it will only keep the government funded until either mid-Nov or mid-Dec at best. At that point both parties will once again have to lock horns. A bigger concern may actually be the upcoming "debt ceiling" debate. Shutting the government down for a week or two seems to be tolerable by most bulls, but the echoing sounds of a US "default" would be a much more deafening battle cry for the US stock market.
Italy could be another major obstacle this week as Berlusconi sends the Italian government into a complete tailspin after ordering his parties ministers to step down from their current government positions. Fear is the political chaos could quickly bring on more rating agency downgrades to Italy and renewed market pressure previously associated with negative EU debt crisis headlines.
Bottom-line, political issues both here in the US and Italy may provide some fairly strong headwinds for the outside markets the next couple of weeks. The US dollar, crude oil, the US stock market and most major metals are all lower to start the week. CLICK TO RECEIVE MY FREE REPORT