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What does a government shutdown mean to you?

by Fortem Financial December 21, 2018

The federal government is headed for a partial government shutdown that will likely last until January 3rd when the new Congress is sworn in. This is not the first time we have had a government shutdown through the holiday season, as we had one in 1995 when Bill Clinton was president. The major difference between today and 1995 is that this will be a “partial” shutdown with nearly 75 percent of the government already funded and completely unaffected by the shutdown. That leaves just 25 percent of the government impacted by the shutdown. We anticipate a significant portion of personnel will be considered essential and receive exemptions. As such, it could be that less than 10 percent of the government will be impacted. Historically, shutdowns have not had a major impact on the US economy or financial markets. If the partial shutdown occurs, the impact will be even less. However, we are keeping an eye on the secondary effects:

1.  Shutdown headlines will run throughout the holiday season, at a time when media reports are also leading off with falling stock values.

2. The unpredictability of Trump. He agreed to no shutdown on Wednesday, but was spooked by conservative media over the border wall and reversed his position Wednesday night. This is going to make the more important policy issues for financial markets, the debt ceiling and sequestration, tough to solve in 2019.

3.  Because Trump is not getting the wall, he pulled out of Syria by Twitter. This triggered a set of effects including General Mattis resigning. Mattis leaving seems to be a far bigger event. With Mattis gone, does this make it easier to put EU auto tariffs in place which required DoD sign-off? How about Jay Powell being removed as Fed Chair?

4. Republicans are starting to turn on Trump. There are cracks developing in the structure. The economy was holding Trump up and that is fading.

The 1995 shutdown over the holidays was the longest on record. Our belief is that if we shut down tonight, the partial shutdown will be at least 12 days.

We wanted to point out a few facts the media is always inclined to leave out when it comes to government shutdowns.  (1) Most government employees are paid every two weeks, and as stated above, the expectation is that this shutdown will likely be less than two weeks. (2) Further, in past shutdowns the government has generally paid in arrears the wages that would have been earned had their been no shutdown.  (3) Essentially, as long as the shutdown does not last too long , it really should have virtually no affect on the economy.  It is true, the impacted government employees may very likely have to wait an extra week for their paycheck to arrive, but they can reasonably expect to receive their paycheck.  (4) It's also convenient that this shutdown did not start at the beginning of the holiday shopping season.  Perhaps a government shutdown in the third week of November that lasted through the first week of December would have dampened the confidence of some, and led to a reduction in their holiday spending, but that was not the case.

WHAT IS FUNDED AND WHAT IS NOT FUNDED

Departments and agencies already funded for fiscal year (FY) 2019 include

  • Army Corps of Engineers
  • Department of Defense
  • Education Department
  • Department of Energy
  • Health and Human Services
  • Bureau of Reclamation
  • Department of Labor
  • Federal Energy Regulatory Comm
  • Nuclear Regulatory Comm 
  • Social Security Administration

The following departments and agencies have not been funded and would be affected if the Federal government shuts down

  • Agriculture Department
  • Commerce
  • Homeland Security  
  • Housing and Urban Development
  • Interior  
  • Department of Justice
  • Department of State  
  • Department of Transportation
  • Treasury  
  • District of Columbia
  • Environmental Protection 
  • Executive Office of the President
  • Federal Communications  
  • Food and Drug Administration
  • General Services Admin  
  • NASA
  • SEC 
  • U.S. Postal Service

There is still time for a deal to be made but we wanted to give you our thoughts at this time.  We will know more by the end of the day. Please call or email us with any questions you may have.

Source:  Strategas

 

Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017, 2018 Five Star Wealth Managers!

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The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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