US government shutdown: Risk or investment opportunity?

VTV.vn - The US government has been shut down for a week, but stocks are still rising thanks to expectations of a Fed rate cut, although analysts warn of risks if the situation persists.

US Capitol Building in Washington, DC Photo: THX/TTXVN

The US government has been shut down for a week now, and many important economic indicators related to the labor and employment situation have not been released. However, the market is still operating quite smoothly. So what is the driving force behind this phenomenon and can the market continue to rise or is there still a risk?

Major indexes listed on the New York Stock Exchange continued to rise last week. Expectations that the Federal Reserve will continue to cut interest rates have overcome concerns about the US government shutdown.

The Wall Street Journal published an article: "Stocks hit record highs on optimism about interest rate cuts". In it, the analysis of investor optimism about the Fed's additional interest rate cuts pushed US stocks to set a new record in the first session of the week.

Traders are betting on two more rate cuts for the rest of the year, according to the CME FedWatch tool. Some investors are dismissing the government shutdown as a routine event with little impact on markets. Instead, they have turned their attention to the upcoming third-quarter earnings season.

Yahoo Finance explains further: Strong stock market gains during government shutdowns are not unprecedented. According to data from LPL Financial, the S&P 500 has posted positive performance during every government shutdown since 1955.

From another perspective, some newspapers believe that investors should still be cautious about the market's continuous peaks, because there are still many risks if the government shutdown continues.

Reuters is one of the newspapers that clearly emphasized this point in the article: "A prolonged US government shutdown could increase market risks".

Specifically, a government shutdown lasting several weeks could create confusion about the Fed’s monetary policy direction, as the central bank would not have official data to support its decision-making. At the same time, a prolonged government shutdown could also be a drag on economic growth.

According to an expert quoted by the newspaper, if the government extends beyond the previous 2-4 week timeframe, it will lead to concerns among global investors when looking at the US economy. This expert himself has shifted some assets away from US Treasury bonds to look for other investment portfolios, including international bonds.

Bloomberg has assessed that if the US government shutdown lasts longer than a month, the stock market's rise will be slowed. In the current context, the USD is the asset under the strongest downward pressure.

Source: https://vtv.vn/chinh-phu-my-dong-cua-rui-ro-hay-co-hoi-dau-tu-10025100816131558.htm