Vice President JD Vance said Tuesday he believes a government shutdown is imminent, blaming a political impasse over healthcare funding. ‘
However, a recent market analysis from LPL Financial suggests that while the looming shutdown is cooling a recent market rally, any resulting downturn should be viewed as a buying opportunity, asserting that the long-term bull market is not in jeopardy.
Vance Sees A Strong Possibility Of Government Shutdown
“I think we're headed to a shutdown because the Democrats won't do the right thing,” Vance stated outside the White House, placing the blame on Democratic leaders for linking government funding to healthcare negotiations.
This political gridlock aligns with market expectations, as betting markets have priced in a 63% probability of a shutdown occurring this week. Democrats have maintained that they will not approve a spending bill without concessions on healthcare, including the reversal of the White House’s Medicaid cuts.
Analysis Says ‘Buy The Dip’ In Case Of A Shutdown
Despite the political turmoil roiling Washington, financial analysts advise investors to look at the historical context. LPL Financial’s report notes that government shutdowns are typically short-lived, with an average duration of eight days since 1976.
The firm's Chief Technical Strategist, Adam Turnquist, suggests that while markets are showing signs of weakness due to “overbought conditions paired with diverging market breadth,” a pullback could be healthy.
The report frames a potential decline as a “tactical opportunity to buy the dip,” especially ahead of what is historically a strong fourth quarter for stocks.
See Also: Investors Brush Off Looming Shutdown — But Economists Warn Costly ‘Data Blackout’ Could Skew Outlook
Bull Market Is Not At Risk
The commentary’s long-term outlook remains positive, reassuring investors that the fundamental drivers of the market are still in place.
“First and foremost, we don’t think the bull market is at risk of ending,” the report states.
It points to strong earnings, a Federal Reserve rate-cutting cycle, and sustained investment in artificial intelligence as key catalysts that should keep the bull market alive.
Historically, investors have generally looked past these budget-related disruptions, focusing instead on broader economic trends and corporate earnings.
How Does A Shutdown Impact Financial Markets?
However, the primary concern for financial markets, as highlighted by Jim Bianco, President at Bianco Research LLC, is not the shutdown itself but the suspension of government services that produce vital economic statistics.
"The biggest FINANCIAL MARKET impact from a shutdown is the suspension of government-released economic data," he stated. This "data blackout" could have tangible consequences quickly; for instance, the critical September unemployment and payroll report, due Friday, Oct. 3, would not be released if the government is closed.
Price Action
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, fell in premarket on Tuesday. The SPY was down 0.19% at $662.44, while the QQQ fell 0.16% to $597.80, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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