Here we go again. When will Washington get its act together? Politicians are unable to agree on budget spending and the deadline is midnight tonight. It feels as if we’re all trapped in the movie Groundhog Day. Different day, same story. In fact, budget issues have happened so often that many of the 800,000 government employees who face temporary furlough have become lackadaisically indifferent to their own plight and the government’s problems. Sadly, it’s all status quo now. The last time the government blacked out was during the Clinton administration; in 1995 for five days, and for 21 days in 1996.
As the hour draws closer, Wall Street is in a broad slump today as stocks have fallen sharply on the more than likely scenario of no agreement being reached. All 10 S&P 500 sectors are lower so far today, and 80 percent of companies traded on both the New York Stock Exchange and NASDAQ have fallen. Of greater worry is that consumer confidence is set to take a nosedive if an agreement of some sort is not reached; and soon. Stocks are reacting accordingly. Given that economic growth continues to be weak, Wall Street may be ripe for a selloff this time around, with the S&P at a near all-time high and no sustained pullback so far this year. Government contractors will be especially affected. This includes both large and small-cap entities. Timing. It’s all about timing.
A government shutdown will affect the lives of every person in this country. In 1995 when the government ran out of cash, services that were considered non-essential came to screeching halt. It affected international travel, weather reports, and museums. National parks were shut down with a loss of over 7 million visitors. NIH disease hotlines and CDC disease surveillance were immobilized. Over 600 toxic waste dump sites went untended. Federal courts closed. New Social Security claims were not processed. Hiring and training of law enforcement officers was halted. And the list goes on.
Globally, markets fell in response to the impending shutdown. Australia’s S&P ASX 200 lost nearly 1 percent. The Nikkei fell 2 percent, while the U.S. dollar weakened against other major currencies. In Europe, the benchmark oil contract for November delivery was down to $101.51 a barrel in trading on the New York Mercantile Exchange.
On the bright side, with oil prices dipping, now might be a good time to snap up a few shares. Other resource stocks are lower today and worth a good look. Gold should strengthen substantially, then abruptly pull back as a resolution is reached. In effect, as an investor use the government’s problems to your advantage. No sense in letting a perfectly good shutdown go to waste.