The Government-Dominated Market

This week’s market action has been dominated by — you guessed it — the political showdown in Washington and the government shutdown. Wednesday marks day two of the partial federal shutdown. As of this writing, both Democrat and Republican leaders are vowing not to budge in the battle to come to terms on a stop-gap measure to keep the government fully funded.

Now, while I suspect this political theater will come to an end relatively soon, nobody knows just when the situation will be resolved, hence the uncertainty and selling we’re seeing in stocks right now. Moreover, the fight over the budget will soon take a backseat to the real pending fight over the much more significant issue of the debt ceiling. This is a battle that, I suspect, will negatively influence markets going forward, and that is something all investors must be prepared to tackle.

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