US government shutdown 2025: What it means for US and Indian stock market?
US shutdown 2025: The US government shut down several of its key operations on Wednesday, October 1, after a vote to extend the federal funding failed in the US Senate. The Congress and the White House were unable to reach a deal to extend funding, which, according to experts, could result in the loss of thousands of federal jobs.
This is the 15th US government shutdown since 1981, and experts say that if a deal is not reached swiftly, it could halt the release of the September jobs report, delay air travel, withhold pay for US troops, and put 7,50,000 federal workers on furlough, costing about $400 million each day.
As Mint reported earlier, during US government shutdowns, the rules stipulate that essential workers must report to work. However, it is unlikely that they will receive pay till the government opens up, after which they will be back-paid.
There would be pressure on the government to reopen, as the shutdown threatens to cause missed paychecks, given the typical US pay cycle.
What US shutdown means for US and Indian stock market?
Dow Jones futures were in the red, while the US dollar index dropped to a one-week low following the shutdown’s start.
Experts believe the shutdown will have a short-term, minor impact and will not have a significantly negative effect on the market.
The last US government shutdown, from December 22, 2018, to January 25, 2019, occurred during Donald Trump’s first term. At 35 days, it was the longest shutdown in the past four decades.
The Congressional Budget Office (CBO) estimated that the shutdown permanently reduced US real GDP by about $3 billion or 0.02 per cent. However, it did not have a negative impact on the US and Indian stock markets. In fact, the S&P 500 Index gained over 10 per cent during the 35-day shutdown. Indian stock market benchmark Sensex gained 0.80 per cent in this period.
Experts believe that a compromise among all parties involved is inevitable, and things will return to normal within a short timeframe.
“The US government shutdown is not a major concern for the markets. I believe the markets will largely ignore it. Some compromise solution will eventually be reached because the system cannot come to a complete standstill,” said G. Chokkalingam, founder and head of research at Equinomics Research Private Limited.
“That’s what we saw last time, too—not only during the shutdown, but even when the US hit the debt ceiling. Salaries were delayed, but the broader economy and markets were not severely affected,” Chokkalingam added.
Pankaj Pandey, the head of research at ICICI Securities, also believes that the US shutdown may not significantly impact the US economy.
“I don’t think the US government shutdown can weaken the US economy significantly. The US market itself doesn’t seem too worried. From a flows perspective, it’s unlikely to have a major impact,” said Pandey.
Pandey believes it is not a major trigger for markets but may be slightly positive for emerging markets like India due to weakness in the US dollar.
“It could be slightly positive for India, as investors may prefer to allocate funds to markets that remain unaffected. Overall, the shutdown isn’t a significant trigger for markets at this stage,” said Pandey.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.