U.S. Government Partial Shutdown Appears Likely

Funding for federal agencies is set to expire at midnight on September 30. If a resolution is not reached and signed by President Biden before this deadline, many federal workers will be furloughed. If the shutdown is prolonged, this could affect the collection and release of certain economic data. The Federal Reserve (Fed) is an appropriated agency and therefore should not be impacted by any furloughs.

These shutdowns have occurred several times in the past with the most recent in December 2018, which lasted 35 days (the longest on record). Importantly, this is not a debt ceiling debate which could potentially have more impact. Historically, these shutdowns have had minimal impact on the economy as they are typically resolved quickly. However, a prolonged shutdown could weigh on economic growth and jobs as furloughed workers go longer without pay.

Our View

While headline grabbing and impactful for some on the margin, in the aggregate, we expect a minimal impact if the shutdown lasts for a couple weeks. We believe extending beyond that opens the door to further uncertainty as it would materially delay key economic data points that could impact monetary policy and the Fed at its November meeting.

Disclosures

Past performance is not indicative of future results. Any type of investing involves risk and there are no guarantees that these methods will be successful. Economic charts are provided for illustrative purposes only. The information provided herein is subject to market conditions and is therefore expected to fluctuate.

The opinions contained in this presentation reflect those of Sterling Capital Management LLC (SCM), are for general information only, and are educational in nature. The opinions expressed are as of the date of publication and are subject to change without notice. These opinions are not meant to be predictions and do not constitute an offer of individual or personalized investment advice. They are not intended as an offer or solicitation with respect to the purchase or sale of any security. This information and these opinions are subject to change without notice. All opinions and information herein have been obtained or derived from sources believed to be reliable. SCM does not assume liability for any loss which may result from the reliance by any person upon such information or opinions.

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About the Author

Andrew Richman, CTFA

Senior Fixed Income Client Strategist

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Andrew Richman, CTFA, Managing Director, joined SunTrust in 2001 and SCM in 2020 as part of an integration following the merger of equals between SunTrust Banks and BB&T Corporation. Andy has investment experience since 1988 and is a Fixed Income Portfolio Manager and Senior Fixed Income Client Strategist. Prior to his 20 years in SunTrust’s portfolio management division, Andy ran a trust and investment department in Florida as the trust department senior manager and worked as an equity portfolio manager with Sanford Bernstein. He received his B.A. from the State University of New York at Albany and his M.B.A. with a concentration in International Business from the University of Miami. He is also a graduate of the ABA National Trust School at Northwestern University and holds the Certified Trust & Financial Advisor designation.