WHAT’S GOING ON WITH THE U.S. GOVERNMENT?
Why is everyone talking about a possible “shutdown,” what are Trump’s threats, and of course… what does all of this mean for us?
Because when the world’s largest economy is at risk of shutting down, it’s good to know how — and if — we should react.
THE SHUTDOWN SITUATION
Let’s get straight to the point. If no agreement is reached by midnight on Tuesday, the U.S. government will run out of funding. From 12:01 a.m. on Wednesday, an official shutdown begins.
That means hundreds of thousands of federal employees will be furloughed, and many government services will cease to function. Yes, even the SEC will barely be operational. And not just that: there will likely be delays in social benefit payments, approvals for small-business loans, and even clinical trials of new drugs.
“How did we get here?” you may ask. It all started because Republicans and Democrats can’t agree. Republicans are demanding stricter control over debt and deficits, while Democrats are pushing for an expansion of Obamacare benefits and the reversal of Medicaid cuts.
The House passed a temporary funding bill through the end of November, but Democrats blocked it in the Senate, demanding fairer, bipartisan negotiations. The crisis is looming, and everyone is looking to the White House for a solution.
As of now, prediction markets see a shutdown as more likely than not. According to Polymarket, the odds are around 80% (even hitting 83% on Saturday). Other markets like Kalshi and PredictIt are in the 67–69% range.
In plain English: markets are pricing in a shutdown as the baseline scenario. Of course, as we saw in October 2023, high odds don’t always guarantee the outcome — back then a deal was reached literally at the last minute. But each situation is different, and this time the political climate seems even more polarized.
TRUMP’S THREATS
As if things weren’t tense enough, Donald Trump is turning up the heat. In a recent NBC interview, he stated bluntly:
If a shutdown happens, we will fire a lot of people. Permanently.
Yes, you read that right. Not just temporary furloughs like in 2013, when 850,000 workers were sidelined. He’s talking about permanent layoffs.
The Office of Management and Budget has already instructed agencies to prepare “reduction-in-force notices.” In other words, be ready for mass terminations.
This marks a sharp departure from past shutdowns, where workers almost always returned once funding resumed. Trump’s threat changes the stakes — and increases pressure on Congress to cut a deal. But so far… no compromise in sight. The political divisions are only deepening, and the clock is ticking.
MARKETS
So, how will this affect the markets?
Historically, shutdowns have had only mild to moderate market impact. The S&P 500 usually dips at first, then recovers. Analysts caution, though, that every case is different.
This time, there’s a key difference: markets are already stretched.
-
The S&P 500 is near record highs.
-
Volatility is very low.
-
Any shock could trigger a sharp correction.
Even a small negative headline could act like a spark in dry wood.
And on top of that, a shutdown would delay the jobs report (payrolls) — critical for the next FED decision. If the shutdown drags on, key inflation reports could also be postponed, leaving the FED to make monetary policy choices with incomplete data.
IN SIMPLE TERMS
-
Uncertainty is rising.
-
Valuations are high.
-
Markets are vulnerable to a pullback.
-
The FED may be forced to act with missing information.
SO WHAT SHOULD WE DO?
This is where strategy matters. Not prediction — strategy.
Posted Using INLEO