Government Shutdown Looms As Next Market Headwind

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Next up? Avoiding a government shutdown ahead of the Oct. 1 deadline. I was going to write about the end of September stats and a possible walk away trade, but right now there is something completely ludicrous going on.

Late last week there was a total collapse of efforts to pass a government spending bill.

I know we go through this all the time and it always passes at the eleventh hour, but there is so much extremism on both sides of the aisle. One of these times it won't pass and there will be a shutdown. The nearly 4 million Americans who are federal employees will feel the effect immediately. Essential workers will remain on the job, but others will be furloughed until the shutdown is over — and none will be paid during the impasse.

Fitch cited a decline in “governance” as a key reason for its downgrade earlier this year, a reference to the repeated battles in Washington over the past two decades that have led to government shutdowns or even taken the government to the brink of a debt default. I doubt this is something that most don't already know, but should this occur it will have very negative economic consequences and be another big problem for stocks.

All this while the Writers Guild (WGA) and the United Auto Workers (UAW) are striking — although the WGA seems to have come to a deal.

To conclude, aside from the end of the third quarter, there are a lot of moving parts this week and my guess is it's not going to be good for the S&P.