By Michael Zezas, global head of Fixed Income research at Morgan Stanley
The US government’s legal authority to spend on many items, including much of its operations, runs out on September 30. Congress is working on a deal to avoid the ‘shutdown’ that would follow. How’s it going? Not great. For investors, it’s time to prepare for this event, which means understanding what a shutdown does and doesn’t mean for markets. Our economists flag that a shutdown won’t matter much to growth if resolved within a couple of weeks, but it adds to factors that will likely drive a slowdown into 4Q. Hence, we think a shutdown could crystallize investors’ economic concerns, limiting risks of bonds continuing to underperform equities.
Let’s break this down:
