Two weeks into the U.S. government shutdown, traders are beginning to price in the uncomfortable possibility that Washington's gridlock could drag on long enough to break records, bringing with it a cascade of economic and financial consequences.
According to Kalshi, a betting platform regulated by the Commodity Futures Trading Commission, the current odds project the shutdown to last 34.5 days, teetering on the edge of surpassing the 35-day shutdown of 2018-2019, the longest in U.S. history.
While the probability of resolution by Oct. 30 still stands at 62%, chances of exceeding the record of 35 days sit at a concerning 46%.
What Happens If The Shutdown Passes 30 Days?
Government shutdowns—historically averaging just six days—tend to leave little trace on the economy or the stock market.
However, once the disruption lasts more than a month, the market stops filtering out the noise.
"The longer the government shutdown lasts, the more it will add to volatility," said Dennis DeBusschere, analyst at 22V Research.
Investors, he said, are unable to commit to riskier assets without timely economic data. While 22V still expects lawmakers to fold after federal workers miss their first paycheck, that moment could be a crucial pivot point.
The first payday at risk is mid-next week, which could pressure lawmakers to act. If not, economic damage begins to compound.
Already, air traffic control disruptions are emerging, with pockets of understaffing at the TSA and FAA affecting U.S. airports.
Data Drought Threatens Fed Outlook
The shutdown has already silenced key government agencies. The Bureau of Labor Statistics failed to publish the September jobs report, leaving investors in the dark about one of the most closely-watched labor indicators.
The inflation reading is expected to be published with a 10-day delay on Oct. 24, just six days before the Federal Reserve’s Oct. 30 meeting.
Without accurate data, monetary policymakers may find themselves flying blind. For markets, that means a broader range of policy outcomes and more volatility.
Market Impacts Begin: IPOs & Government Contractors
The financial sector is also feeling the pain. Ed Yardeni said in a note this week that "skeleton staffing at the Securities and Exchange Commission has brought the IPO market to a halt."
The Renaissance IPO ETF (NYSE:IPO) has declined by nearly 10% after reaching a three-year high last month.
Every day the government remains closed intensifies the drag on the economy.
The expiration of an enhanced ACA benefit looms at year-end, and there's little hope for sweeping reform or restoration of Trump’s so-called One Big Beautiful Bill Act (OBBBA) spending cuts in the near term.
Yardeni said that "the longer the government shutdown drags on, the longer some government employees will face delayed paychecks and some government contractors will be out of work entirely."
The travel sector may soon be hit harder, as air traffic controller shortages threaten to cause more delays at airports—an issue that could start weighing on consumer sentiment just as the holiday travel season ramps up.
For now, markets remain relatively calm.
But if the stalemate continues and critical data releases are missed, Wall Street may not be able to shrug off Washington's dysfunction for much longer.
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