Ashley Owen, head of investment strategies at AES International said: "Once again the US Government looks like it could be ‘shutdown’ next week, with Democrats and Republicans disagreeing over the funding of the controversial government-sponsored family planning clinic, Planned Parenthood.
“When a shutdown last occurred in October 2013, the economic impact was relatively small, with an estimated 0.6% knocked off the country’s fourth quarter GDP. However, the 16-day event caused major disruption for millions of government employees as well as businesses and services which rely on government contracts.
“The uncertainty that it brings – will it happen, how long will it last if it does – will add to an already unsettled market. This time around, the world’s economic position is arguably more unstable than in 2013, with concerns of a slowdown in China and emerging markets just last week adding pressure on the Fed to halt plans to raise interest rates. You also have to wonder whether this impending political maelstrom was at the back of the Fed’s mind during that decision too.
“In fact, depending on how long it lasts, if a shutdown did occur, it may be a contributing factor in the Fed pushing an interest rate rise into next year. The central bank would not want to increase rates after millions of people had just spent weeks out of work."
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