Government Shuts Down, Then Quickly Reopens

Congress failed to pass a continuing resolution to extend government funding before the midnight deadline on February 8, though it passed a bill (very) early the following morning. So after a five-and-a-half hour closure, the shutdown ended.

The bill that was ultimately passed is set to authorize more than $300 billion in additional spending over the next two years, including the following increases:

  • $165 billion for the military
  • $131 billion for domestic programs
  • $90 billion in disaster relief for Texas, Florida, and Puerto Rico

Notably for investors, the bill also extended the debt ceiling until March 2019 and funds federal agencies until March 23, 2018, giving Congress additional time to develop a spending bill that will (hopefully) last through September 30, 2018—the end of the federal government’s fiscal year.

So what does all of this mean for investors? Our Chief Investment Strategist John Lynch summarized the situation as follows: “In addition to the roughly $200 billion (or 1% of gross domestic product) in tax cuts for 2018 that were authorized by the tax reform bill, Congress just authorized an additional $300+ billion in spending over the next two years, which should act as further fiscal stimulus for the economy.” Importantly, this bill opens up the possibility of yet another budget showdown in late March, though as our recent Timely Topics, “What Do Government Shutdowns Mean for Investors?” publication indicates, shutdowns have historically been a nonevent for markets.

IMPORTANT DISCLOSURES

The economic forecasts set forth in the presentation may not develop as predicted.

All performance referenced is historical and is no guarantee of future results.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments, and exports less imports that occur within a defined territory.

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