In a new article published in Investment News, Thorn Run's Jason Rosenstock provides an analysis of Senate Majority Leader Mitch McConnell's (R-KY) efforts to avoid a government shutdown on September 30. According to Rosenstock, Leader McConnell will not allow government funding to expire, but he wants to extract concessions for that decision. "McConnell and the White House are on a path to a game of chicken," Rosenstock says in the article. "It's likely to be a bumpy ride to the edge again."
Advisers warned federal government shutdown could cause more market volatility
Conservative Republicans are pushing House Speaker John Boehner, R-Ohio, and Senate Majority Leader Mitch McConnell, R-Ky., to include a provision that would defund Planned Parenthood, a move Democrats resist. Democrats want to raise domestic spending levels, something that causes Republicans to recoil.
And so once again, Congress finds itself on the brink of triggering a government shutdown. The expiration of highway funding in October and the debt ceiling in November adds heat to the bubbling cauldron.
“We're likely to see some [market] volatility as Congress wrestles with these deadlines,” said Andrew Friedman, principal at The Washington Update. “I think there’s still a high risk of shutdown because [Mr.] Boehner may cater to conservative Republicans and not introduce a [continuing resolution] that would pass with Democratic support.”
Investment advisers, who have been keeping their eyes on China and theFederal Reserve, now have to turn their attention to Capitol Hill. Even if there is a short-term continuing resolution, it only pushes the conflict into the holiday season.
“The next couple months are going to be rough seas for advisers in terms of greater political risks to the markets,” said Duane Thompson, senior policy analyst at Fi360, a fiduciary consulting firm. “Most advisers are going to tell clients to buckle their safety belts.”
Mr. McConnell has said that Republicans won't let the government close nor will they allow a default on the debt. But he also wants to extract concessions for such a decision, according to Jason Rosenstock, a partner at Thorn Run Partners, a government-relations consulting firm.
“[Mr.] McConnell and the White House are on a path to a game of chicken,” Mr. Rosenstock said. “It's likely to be a bumpy ride to the edge again.”