Government Shutdown and Growth Concerns 

Gains can be limited, bears can be boosted! 

Market analyst – IFC Markets

According to an analysis by Moody’s Analytics chief economist Mark Zand, the US economy can face another recession, if the US defaults. The recession can affect more than 6 million jobs. While we are getting closed to the deadline for approval of the bill, the market concerns growing and limit the market bulls. Is that matter, and seriously? 

While the Fed beginning to slow down supports, the fear over the recovery will erase the market sentiment and growth will slow. On the other hand, a potential US government shutdown has been added to all these concerns.

The first question is what happens when the government is shutting down? The last time we had shouted down was just 3 years ago, on December 22 at the time of Mr. Trump’s presidency, and many employees spend long Year-end holidays. Many pieces of research showing that mentioned 35 days and government hogtie reduced economic growth by $3 billion. Now, this possible shout-down is a little wider, like what we had back in 2013, which paused the works of more than 850K employees, and can cause more damage. According to previous experiences, this issue can stop some government activities, but not Border protection, In-hospital medical care, Air traffic control, Law enforcement, and Power grid maintenance as the essential services. 

For now and based on the latest update, lawmakers on Capitol Hill are locked, however, they have to get to some points before Friday. Also, we have some reports that Senate Democratic Leader Chuck Schumer asked for short term budget proposal to fund the government through early December. 

While in the first hours of Wednesday, the SP 500 climbed attempting to gain back some of its losses of the first days of the week, though ongoing concerns about the economic recovery and a potential government shutdown continue, in last hours eased a bit but still gaining about 0.2% in the last hours. The Dow Jones Industrial Average also gained 0.3%, and the NASDAQ is down 0.3%.

From the technical point of view, as we can see in the below H1 chart of Dow Jones futures, it is trading around a key level at 34,300, and breaching under this level can open the door for lower levels, while descending the OBV trend line and RSI at 42, supporting the bearish insight. And if Republicans and Democrats can not find a way, this decline can continue further. 

Government Shutdown

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