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Shutdown. Slimdown. Call it what you will. Senate Democrats. House Republicans. Blame one. Or, blame both. The fact remains that policy kerfuffles out of Washington, DC are raising anxiety levels among investors, here and abroad. Not to mention among the furloughed federal workers. This grandstanding/brinksmanship is also bringing into a sharp focus the next big debate on raising the debt ceiling, which will be more detrimental to investor confidence. Some agencies, ranging from the DoD and the CDC to EPA and NASA, are likely to feel the shutdown more than others, particularly if it drags on.
So far, equity markets have met the news with equanimity, optimistic that the shutdown will be shortlived and that the economy is on a firmer footing to withstand some turbulence. But if the fiscal drag and the standoff continues, it could have consequences far beyond just talking heads on cable news channels, missed data releases and closed national parks. Has the economy weathered the sequester and budget cutbacks much better than anticipated, only to be threatened by another derailment ?

Source : CBRE Global Investors

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