Barring a last-minute deal between Democrats and Republicans, the U.S. government will face a funding gap and consequently shut down on October 1. While the Republicans hold a Congressional majority, they do not have a wide enough margin in the Senate to restore funding on their own. This means they will need help from the Democrats. The most significant disagreement concerns the impending expiration of Affordable Care Act (ACA) subsidies. Democrats are demanding an extension for their vote. Republicans have thus far been unwilling to compromise.
While shutdowns sound scary, we have been here before. There have been 20 since the modern appropriation process was formalized in 1976, and they have tended to be short-lived, averaging just eight days. The only concerning fact is that the longest number of furloughed days occurred during President Trump's first term, when employees were furloughed for over 30 days.
U.S. Shutdowns Have Generally Been Short-lived
Duration of Government Shutdowns/Funding Gaps: FY1977-FY2019
Data Source: Strategas, September 2025.
Labor and the Statistics of Labor Impact
When government employees are furloughed due to a shutdown, many non-essential government offices close, and their workers stop getting paid. This has the potential to affect a variety of sectors and, the longer it goes on, it may have a rising impact on consumer and business confidence. Shutdowns also affect government economic data releases, including Friday’s payroll numbers, which can be market moving in themselves. Not having this data may hinder the Federal Reserve’s ability to gain clarity on whether to cut interest rates in December based on economic conditions. That may be a stickier problem for markets.
While economic visibility may be temporarily dimmed, from an actual economic perspective, government shutdowns in the United States have had very little impact on overall GDP or the stock market. In fact, in most cases, after an initial drop, the stock market was up on the closure. GDP disruptions have been minuscule and temporary. It would likely take a more extended shutdown to make a significant economic impact. While President Trump’s first term set the record, and a short shutdown is our base case, a more extended shutdown (45–60+ days) seems very unlikely to us.
The Spending Impasse May Have a Silver Lining
The U.S. economy is strong, and we expect a shutdown to be short-lived and have no material economic or market effects. But whether the duration is short or more extended, we think a shutdown may reveal buying opportunities for long-term investors. If a more extended shutdown were to occur, we believe investors should not fear the situation, but rather look for the silver lining while managing the evolving risks. It is impossible to predict the exact timing of any changes ahead, but if there is a shutdown and it lingers, it may offer a pivotal moment for investors to access deeper discounts across the spectrum of equity.
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