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.

 

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