October 6, 2025 Shutdown again—for the markets no drain

Last Wednesday, the Senate failed to pass a funding bill, resulting in the most recent U.S. government shutdown. Federal funding for fiscal year 2025 ended at midnight.

Interestingly, this time the shutdown is not due to surpassing the federal debt ceiling, which has been the normal trigger in the past. In July, the U.S. debt limit was increased to USD 41.1 trillion following the passage of the “One Big Beautiful Bill Act” and the U.S. national debt currently stands at “only” USD 38 trillion. Consequently, the government did not run out of borrowing capacity last Wednesday. Federal funding capacity stopped due to the failure to reach a valid budget in Congress. However, the consequences of shutdowns are always similar and by no means negligible, especially if a shutdown lasts longer. Shutdowns can seriously disrupt all levels of government and negatively impact the economy.

The partial closure of the government that began last Thursday will result in the furloughing and layoff of hundreds of thousands of federal workers. The Congressional Budget Office estimates that approximately 750,000 employees will be furloughed each day. Some job losses could become permanent, as President Donald Trump seizes the opportunity to signal mass firings. "I can’t believe the Radical Left Democrats gave me this unprecedented opportunity," he said. By the way, the longest shutdown to date (35 days) occurred during Trump's first term in office, almost seven years ago, when the Democrats refused to approve funding for Trump's wall.

The shutdown is a disruption in the truest sense, and it comes at a time when dozens of disruptive moves have already occurred since Trump took office. The markets don't seem to care and have even advanced further. Is this a reason to worry? Of course, we see some risks for the stock market. However, shutdowns have never had a significant or long-lasting negative impact on the stock market. In fact, it digested the longest shutdown in 2018/19 without any problems. This time, as well, the market's reaction was close to zero. One might think that a shutdown in an already disruptive and uncertain time could cause havoc. However, if it’s embedded in government actions which the market views positively(since Trump’s election, the Nasdaq100 rose 25%) a shutdown is obviously seen as another piece in what is essentially a very pleasing mosaic.

Currently, growth driven by AI is the name of the game. Take a look at what's happening in the markets: Global equity ETFs saw inflows of USD 152 billion in the past three weeks, the largest on record. The weekly inflow into tech ETFs alone was USD 9.3 billion, which is also the largest on record.

We are staying invested.