Please note that this was originally distributed on September 30th.
The prospects of a government shutdown loom large and the odds are increasing as we get closer to tonight’s deadline. We won’t speculate on politician’s desire to avert a shutdown, instead draw upon the limited historical comparisons that exist. In particular, the last shutdown was 18 years ago and did not derail the economy, the jobs market or asset values, even though at 21 days, it was the longest government shutdown recorded. Of course the world was a very different place back then, but nevertheless our views are influenced by the fact that most government shutdowns are short term in nature. Our bigger concern is the debt ceiling and the potential that a technical or actual default could be used as political leverage. While we are somewhat lackadaisical over a shutdown, the prospect of running out of debt capacity is downright terrifying. From this prospective, we would almost encourage a shutdown, if it forces a quicker resolution to the debt ceiling conundrum. We have attempted to review these issues in the attached report and encourage any questions, comments or observations as we all enter relatively uncharted territory. Read the full commentary now.
As always, please feel free to contact us with any questions, comments and suggestions.