Tag Archive for government shutdown

Why The Fed May Once Again Decide To Delay Tapering QE

The Government Shutdown Might Prevent A Fed Taper

Fed Delaying tapering QEFor months now, the Fed has been hinting that a taper to their $85 billion/month bond-buying program was necessary in the near future.  Since June, every month before the Fed meeting, the stock markets have tumbled and investors have been extremely concerned about how a Fed taper might impact investments.  In September, most had completely accepted the fact that a taper was likely to happen, and were astonished when the Fed pulled back from a taper and kept the program running full swing.  Now, due to the government shutdown, the debt ceiling, and the upcoming change in leadership, it looks like a 2013 taper may no longer be in the cards.

Why The Fed Is Concerned To Start A QE Taper

As was already mentioned, the government shutdown is seriously weighing on the U.S. economy.  The longer the government keeps its doors closed, the worse the financial impact will be on the economy.  In fact, it was estimated by Moody’s Analytics that the shutdown could cost the economy as much as $55 billion if it drags out 3-4 weeks.  That’s the equivalent of the cost of Hurricane Katrina and Hurricane Sandy combined!  To compound the problems, if the debt ceiling is not extended in the near future, the U.S. could be facing the uncertainty of a debt default.  These reasons alone are enough to keep the Fed firm on their current easing programs without making any changes that could potentially have a further negative impact on the economy.

 

So How Is The Economy Actually Doing In The Face Of Uncertainty? 

Unfortunately, there aren’t any good markers to determine how the economy is responding in the face of uncertainty.  The job reports and other surveys of economic indicators are not being released as a result of the government shutdown.  For the Fed’s next meeting on October 29th, they won’t be able to gauge their decision based on unemployment or inflation rates.  With no foreseeable taper date, QE infinity may really be going to infinity and beyond.

 

As an investor, the impact of seeing QE drag on indefinitely could be profound on the economy.  How long can the Fed keep generating extra cash without creating a spike in inflation, or other economic problems?   For more information on how the uncertainty of the next several months could impact the economy and investments specifically, speak to a Redhawk Wealth Advisor near you today.  By staying on top of the times, and making sure your investments are properly positioned to weather the storm, you can ensure your profitability in times of economic uncertainty.

 

 

Turning The Government Shutdown Into An Investment Opportunity

The Government Shutdown Is Upon Us But Investors Can Still Make A Clean Break

The government shutdown is upon usAs of Monday night midnight, the much dreaded Government shutdown went into full effect.  Government employees impacted by the furlough will have four hours Tuesday morning to clear out of their offices as the furlough will affect 800,000 American government employees, delaying their pay, and costing the economy as much as $1 billion per week.  For investors, many have been concerned about their portfolios given the new twist to the markets and the economy.  However, rather than looking at this with fear and trepidation, it’s better to examine the possibilities afoot for better investments.

From A Government Shutdown To The Debt Ceiling Crisis

As congress continues to bicker back and forth over government spending and the defunding of Obamcare, there is only 16 days until the next big issue rears its ugly head.  If no decision is reached on the debt ceiling by October 16th, the government will no longer be able to meet its financial obligations. This is a serious problem when you figure the government borrows 40 cents of every dollar it spends. The last time this topic came up the “almost default” caused Moody to drop the U.S. credit rating a notch, and the stock indexes lost almost 15%.

Stock Markets To Take A Tumble Over Government Shutdown

Due to the volatility it will be no huge surprise to investors if the markets take a tumble given the current state of affairs here in the U.S.  As an investor, this could be cause for concern, unless faced with the proper recourse.   If the shutdown in 1995 is any indicator, we will see a marked drop in equities, depending on the debt ceiling issue; it is unclear just how much they will drop.  The bond market will also see rising interest rates, and dropping yields.  Back in 2011, when the budget battle was last waged, the U.S. treasury dropped from 3.18% to 2.61%, and continued its downward slope to 1.88% in December.  The currency itself will devalue during the shutdown, but could have even more serious implications if the debt ceiling issue is not resolved.  If we are facing possible default, we will see the U.S. dollar take a nose dive.

Where Can Investors Turn To Protect Their Investments During A Government Shutdown

As scary as it may seem to think of losses in the markets, there are some ways to combat the consequences of a government shutdown and debt ceiling battle that will safe guard your investments and increase your profit potential.  As things upset the balance in the markets, investors often turn to their favorite safe haven, gold and silver.  Gold and silver almost always gets stronger when the dollar weakens.  In addition, other commodities such as oil, tend to go up when the dollar is weak.  Another option is to try to time it right and short the market.  Regardless of your safe haven decision, timing is key and it’s important to school your emotions while making major investment decisions.

For more information on the timing of these investments, and how to increase your profit potential during these uncertain times, speak to a Redhawk Wealth Advisor near you today.

 

Possibility Of A Government Shutdown Casts A Cloud Of Uncertainty On The Markets

Stock Market Opens Facing The Uncertainty Of A U.S. Government Shutdown

possibility of a government shutdownIf you haven’t yet been paying close attention to the happenings in Washington, this coming week could have a significant impact on the country as a whole, but also on the economic health and the trajectory of the stock market.  Beginning on Tuesday morning, if congress can’t reach a temporary spending agreement, the U.S. government is scheduled to commence a government shutdown.

What Are The Terms For An Agreement To Avoid A Government Shutdown?

Caught in the balance between Democrats and Republicans is the plans for Obamacare, which is also scheduled to hit the exchanges on Tuesday.  Conservatives have stated that a shutdown can be avoided as long as Obamacare does not go into play on Tuesday.  Unfortunately, since the sides are so polarized on the spending issues and especially over Obamacare, Democrats may allow the government shutdown to occur, knowing Obamacare goes into play regardless of whether or not the government is operating in full capacity.

What Will Be Affected By A Government Shutdown? 

For starters, thousands of employees will be furloughed and given time off work without pay until the government reaches an agreement on spending.  This will not impact services deemed “critical” such as active military, tax collection, the U.S. postal service, and other agencies that can generate enough in fees to cover their expenses.  However, many of the active military will be expected to work without pay until the money is approved by the budget agreement.  For workers, this will impact their paychecks starting mid-october.  For business owners, veterans, students anyone looking for a government loan, their plans will have to wait until the government resumes full functioning.  Hopefully, Social Security payments will continue without problems, but for those newly retired it may create a delay on receiving social security until things are up and running again.   Other operations that will be affected include the National parks, trash collection in Washington, and many other operations.  To give you an idea of the impact, last time there was a government shutdown back in 1995 and 1996 it cost the country a total of $1.4 billion U.S. dollars.

Can The Markets Handle A Government Shutdown?

The stock markets will be opening Monday under a cloud of uncertainty, because the overall impact of a government shutdown puts a damper on the economy and on the markets.  Additionally, as part of the government shutdown, the agencies who issue the monthly job reports and other economic markers that the stock market is so dependent upon will not be operating.  In other words, on Friday when the stock market should gather some information from the job report, investors will have very little to go off of when trying to predict the direction of the economy.  Already, the uncertainty over the government shutdown created some fear within the markets, causing the Dow to drop last week by over 1%.  This was the first losing week of the month for the index.

For more information on how a government shutdown could impact the markets and your investments specifically and to prepare your portfolio for the coming turmoil in the markets, speak to a Redhawk Wealth advisor near you today.

 

 

What Will A Government Shutdown Look Like?

Will Congress Prevent A Government Shutdown? 

Government ShutdownTime is running short between now and when congress must pass a bill to save the government from an impending shutdown.  There is a possibility a short-term bill will be passed to save the day before Tuesday, preventing the shutdown that could be harmful to the economy, but with the posturing and disagreements among lawmakers there is an equal chance that there will be no short-term bill and that the government will be allowed to go into a shutdown.  The question many are asking, is how will a government shutdown impact Americans?

What Does A Government Shutdown Entail? 

The first thing to be done if the government goes into a shutdown is to ascertain who is “essential” and who is “non-essential”  Once that line has been drawn, employees deemed non-essential will be furloughed and will not be paid until the government resumes its full operations.  Those deemed essential will continue to carry on their functions within the government.

What Makes A Government Employee Essential? 

Essential employees/activities are those that protects people and their property.  Depending on ones interpretation this could stand to mean many different things.  For example, in the past “essential” has been deemed as air traffic control, national security, hazardous waste removal, food inspections, border control, maintenance of the power grid, and the continuation of entitlements such as social security, and Medicare.  The IRS will continue to operate as well, in order to preserve the nation’s much needed revenue.  No one knows exactly how a furlough will look this time around, but most anticipate that around 40% of employees will be furloughed without pay.  This accounts for hundreds of thousands of people who need their jobs, going without income.  Some of the more affected departments include the national park workers where 70% of employees will probably be furloughed.

How Will The Furloughs Impact The Economy?

The biggest concerns regarding a furlough are; how long will it last? And will the government be funded in time to be able to pay off current obligations?  If congress has difficulty agreeing on financial things today, who’s to say they will get their act together in time to save the government from reneging on their financial obligations when they no longer have the funding available to pay them.  Additionally, how will having hundreds of thousands of workers out of work impact the greater economy and consumer spending.  As we round the bend into the holiday season, these furloughs could be felt significantly by many Americans.

These are uncertain times for the U.S. economy, and many are concerned about how the decisions made by lawmakers will impact their investments and the overall health of the economy.  For more information on how a government shutdown could impact the economy and your investments, speak to a Redhawk Wealth Advisor near you today.

Can The Economy Weather A Government Shutdown If Congress Shoots Down Bill To Defund Obamacare?

As Budget Debate Continues Republicans Declare War On Obamacare

Defund ObamacareAs the year rounded into the fall months, Congress is facing some very tough decisions on the national budget, and the debt ceiling.  The past several times this issue has arisen, there has been a lot of posturing, a lot of debating and arguing, but not a whole lot of decision making and laws put into effect.  This time around, the government could be facing a government shutdown if both parties cannot reach a consensus on the budget.  One of the primary issues being called into the light is the expense involved with Obamacare; expense both for the government as part of the budget, but also the added expense it will cost the American people in enrollment fees or in penalties to elect not to have insurance.

Republicans Use Delaying Tactics To Prevent Amendment To The Defunding Of Obamacare

 

The bill which contains a plan to prevent government shutdown and also a clause to defund Obamacare as part of the plan, is set to go to a vote by next Wednesday.  Tuesday the Senate floor was taken by conservative Ted Cruz, who made the comment: “All across this country Americans are suffering because of Obamacare.  Obamacare isn’t working.”  Cruz was joined by Sen. Mike Lee, and later Rand Paul, David Vitter and Marco Rubio who kept the discussion in full circle in an attempt to filibuster the bill keeping it from being amended by now and Wednesday. If the Senate democrats are not given a chance to Amend it between now and Wednesday it will go to vote with the defunding of Obamacare as part of it.  Vitter gave a final comment in yesterday’s meeting saying:  “How many more Americans will have to see their wages or their hours cut as a result of this ill-conceived law before we do something about this?”

Is The Defunding Of Obamacare Worth a Government Shutdown?

 

The goal of the republicans is to force congress to vote on choosing to allow the government to shut down, or choosing to defund the Obamacare program set to be launched in 2014.  60 votes are needed in the senate to break the filibuster and get the debate process started on the bill.  That would mean 6 Republicans would have to be in favor of Obamacare to allow for that to happen.  Many of the democrats including McConnell feel that the bill will actually be counterproductive to the long-term budget debate.  Essentially it will leave us with no resolution on the budget issue and a government that will be forced to shut down, and leave Obamacare funded.  This is an undesirable outcome for everyone.  Harry Reid, Senate majority leader who is in support of Obamacare feels that this bill has the potential to tank the economy if a government shutdown does in fact happen.  He made the comment:  “They’re obsessed with defunding health care. They’re pushing us closer and closer to a government shutdown that would tank the economy.”  Already the stocks are struggling in anticipation of a government shutdown and on how the situation will be handled in congress.

For more information on how a government shutdown will impact the functioning of the government, and the overall economy including the stock market and other investments; contact a Redhawk Wealth Advisor near you.  A Redhawk advisor can ensure that your portfolio is poised to weather whatever may come in the economy, even if it is impacted by a government shutdown and other detrimental political roadblocks.

 

 

Will The Debt Ceiling Once Again Be Lifted By Congress?

Will Failure To Address Government Spending Lead To A Government Shutdown?

Prior to the explosion of Syria, congress had a full agenda for the fall that included addressing the debt ceiling and trying to find a solution to the ever illusive Federal budget. With the onset of the issues in Syria, these pressing issues have in many ways been put on a back burner, but by no means does that make them less pressing and concerning for the government.  The primary concern is if congress does not reach some kind of middle ground and either extend the debt ceiling or come up with a budget, we could see a government shutdown or worse, total inability to fund current financial obligations.

What Does Congress Need To Reach An Agreement On In Regard To The Debt Ceiling?

congress and the debt ceilingThe pressing issue at the moment is for congress to agree on the spending levels for 2014, and/or a short-term extension of funding past Oct. 1. If congress cannot agree on this issue we will see a shutdown of the non-essential aspects of the government.   Additionally, come mid-October, congress must approve an increase on the current debt ceiling.  If congress fails to or refuses to do so, the country will be unable to meet their current financial obligations by as early as October 19.  Without an extension of the debt ceiling, the Federal government is in danger of defaulting.

Will Congress Be Able To Agree On The Debt Ceiling?

The primary issue facing congress, is that neither party can come to any sort of consensus or middle ground on how to deal with the spending differences between the democratic and republican parties.  Republicans hope to make the delaying or defunding of Obamacare a condition for raising the debt ceiling.  For democrats, that’s non-negotiable.  The real question is whether or not they will actually be able to set aside their differences enough to make a difference I the legislature to fund the government.  Without intervention, there could very well be a serious financial crisis facing this country in the very near future.

For investors, this scenario is a double-edged sword.  To continue raising the debt ceiling and throwing caution to the wind as far as the federal deficit is concerned, lends itself to economic calamity and disaster years down the road when the U.S. can no longer even manage the payments on the interest of their debt.  However, to no longer meet financial obligations, and to default on the debt could absolutely destroy the current state of the U.S. Regardless, the implications on the economy and the markets could be tremendous.  For more information on how to properly insulate your assets from whatever decisions are reached by the government, speak to a Redhawk Wealth Advisor near you today.

 

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