Why the markets don’t care about the shutdown. And why it could make things even worse


Everything but the essential bits of the US government powered down this morning. And yet, the markets don’t really seem to care.

S&P 500 futures are hovering around 1680, up about 0.3%.

Meanwhile, in the bond market yields are up a bit, but there are few signs of a collapse in confidence in America’s ability to govern itself. Yields on the US 10-year note are about 2.65%. US crude oil is flat. And the dollar is down slightly, but nothing terrifying.

So what’s with the market’s shrug? Essentially, investors have become somewhat inured to the political standoffs and brinkmanship that have characterized the US in recent years. After examining the stock market performance during government shutdowns going back to 1976, Tom Lee of J.P. Morgan wrote in a note to clients: “Equities have fallen 0.2% during the shutdown period (median) but it seems that the longer the shutdown, the greater the…

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