To celebrate the shutdown of the Federal Government, the stock market staged a modest rally today.  Confused?  As you should be.  The market tends to do opposite of which most expect, so if you were expecting the equity markets to plummet with the Federal Government shutdown, think again!  However, before we discount this as just another faux crises that will propel the markets to new highs, there may be more to it.  Today was the first day of the fourth quarter and with that there is quite a bit of rebalancing and portfolio maneuvering by big fund managers and institutions.  Don’t let today’s actions lead you to believe that everything is calm beneath the waters.  Quite the contrary!  The market is not discounting much in the way of a Federal Government shutdown and it is surely not discounting the effect on GDP in Q4 if this persists more than a few days.  With this shutdown many Federal Employees are furloughed, but all essential services are still operational.  That could all change come Oct 17th.  If we don’t have an agreement by then, the debt ceiling is officially reached and cash has run out.  That means that the military may see delay in paychecks and all federal beneficiaries (social security, medicare, etc) may see a disruption of checks.

We are getting close and the market has not voiced its displeasure yet to Washington.  If agreements are not reached very soon then we may get an early Halloween scare on Wall Street.

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