Top Republican Warns: "Government Shut Down Is A Real Possibility, And Wall Street Is Unprepared"

Tyler Durden's picture

In all the spirited rhetoric over the Republicans' failure to pass Obamacare repeal and confusion over what lies ahead, many pundits and market watchers seem to have forgotten that a far more imminent threat, one due exactly one month from today, is that the US government may shut down. As Axios pointed noted, citing a top Republican, after the GOP failure on healthcare, a government shutdown which looms when the continuing resolution runs out April 28 and coincides with Day 100 of the Trump presidency, is "more likely than not... Wall Street is not expecting a shutdown and the markets are unprepared."

Axios further notes that the message CEOs took from Friday's fiasco, according to an executive at a money-center bank, was "Holy crap! We may be facing the same crap on a shutdown threat, and on the debt ceiling. Holy crap! We may not get tax reform, or a repatriation bill, or infrastructure spend, or substantial changes to regulations."

However, while we agree with the quoted republican that by and large markets are unprepared, they are starting to realize that a government shut down is becoming an all too real possibility, as the following just released note from BMO's strategists Ian Lyngen and Aaron Kohli reveals.

The BMO duo note that they have been "fielding questions about ‘what’s next’ for the administration in terms of legislative proposals – tax reforms? An infrastructure program to ‘Repave America’?"

Here is their response:

While Trump would surely like the tax issue to be front and center, we’re starting to hear growing concerns that a government shutdown at the end of April may be a real possibility given the rise of the Freedom Caucus. Moreover, with the Democrats emboldened by their success in averting the repeal of Obamacare (at least for now), there is clearly less incentive to ‘play nice’ with the rest of Congress. In short, rather than clearing the way for tax reforms to take center stage, the healthcare bill mistakes might have more damaging implications for the effectiveness of the new administration than the Trump camp wants to admit.


In considering the market impact from the healthcare bill, perhaps the question shouldn’t be ‘what happens when tax reforms and infrastructure gets passed?’ and rather ‘what happens when the government enters a partial-shutdown on April 28th?’ To the latter question, that would certainly be a bullish event for the Treasury market and risk-off more broadly. The most straightforward implications are that the gridlock and relative strength of the opposition in Washington will simply slow pro-business reforms so significantly that markets will effectively price them out. After all, if Congress cannot keep the lights on in the Capitol building, how much confidence will the market have in their ability tackle the weightier issues of tax and infrastructure spending.


We’ll be the first to admit that we came into this year expecting that the debt ceiling debate would be a complete non-issue given what (at the time) appeared to be a unified Republican government. We were clearly a bit too optimistic, or politically naïve, and what’s currently playing out triggers flashbacks of the summer of 2011 when the US was downgraded by S&P as a polarized Congress wasn’t able to raise the debt ceiling quickly enough. While one might intuitively think that the risk of a downgrade would increase the cost to the borrower (i.e. higher yields), during the period of April 18, 2011 when S&P put the US on “negative outlook” to August 5, 2011 when the downgrade occurred, 10-year yields dropped from 3.40% to 2.56%.


There were certainly a number of other more tangible drivers at play behind the rally as well; slowing economic growth, the Fed’s quantitative-easing program, falling inflation expectations, etc. – but our broader point is that the market’s reaction to another ‘head-to-head’ debt-ceiling debate will be bullish for the Treasury market. If for no other reason than what it suggests will ultimately be delivered in terms of other reforms.

To be sure, traders have demonstrated an amazing ability to reallign the bullish narrative with any change in the underlying facts, so it is quite possible that we are just one month away from the market surging back to all time highs because a shut government is spun as positive for risk assets, the same Trump's healthcare bill failure has resulted in rising stock prices.


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
NoDebt's picture

Oh, sorry, I thought he mean a PERMANENT government shut-down.  I was getting all exicted over nothing.


Looney's picture


Given a choice between Government Shutdown and Chinese Food, I’d always choose the former.  ;-)


Cognitive Dissonance's picture

Wall Street is prepared for one thing only....MOAR

giovanni_f's picture

government shutdown? Ok, what's the bad news?

espirit's picture

They have quit doing anything productive, so we might as well stop paying them.

knukles's picture

Ladies and Gentlemen.
This is the WHOLE reason that the US was and will be downgraded again.
Not the expenditures .... or everybody'd be BBB by now.

It's the inability to even make a simple fucking budget.

JRobby's picture

The Democunts, who think they can always do MOAR and BETTER and therefore assume THEY MUST BE IN CONTROL, will do anything to trip up this administration (as we see, already well documented but as yet un-prosecuted)

Serfs Up's picture

Wank Street might be unprepared, but the central banks are very preppared.  They will always put a bid under this """""market"""""


LawsofPhysics's picture

Makes sense, after all, the Federal Reserve bank stopped paying everyone in 1971...

..we pretend to work and they pretend to pay us...  ...forward Soviet!!!

"Full faith and credit"

shamus001's picture

Oh, it's going to happen! Ever see a single republican sitting on the congressional floor in protest? Holding hands like children?  These Democrats are so childish, and naive to think that shutting down the gov will "break" DJT, and hurt his Presidency.  They likely have "wet dreams" of some poor democratic uprising with Soros purple that will topple the republican working man in the streets-  DON'T DO IT! You will only succeed in spurring a civil war which could only end 1 way.... the massacre of all warring (mildly gun-free) democrats, and when it's done, you will all be arrested and sentanced for inciting treason.

Sounds really "down the rabbit hole" I know... but can you seriously listen to Pelosi, Schumer, Warren & McCain and NOT think this is something they've cooked up in their cookie minds?

ejmoosa's picture

What if the government shut down and there would be no back pay when it was over?

I can dream, can't I?


What if they pared down what was operating to match the cash flows in?  I think that would should America just what we can really afford.

Logan 5's picture
Logan 5 (not verified) ejmoosa Mar 28, 2017 11:34 AM

What if Wall St. & Hollywood shut down?


fucking jew Armageddon there...

John Law Lives's picture

The blade on your avatar's guillotine seems to be moving faster.  Could that be a warning sign...

Wang Dang SP's picture

I thought by now we'd have a light saber guillotine. Something a little more high tech. 

Paper Mache's picture

Noooooo. We want as much medieval drama, blood, guts, and pain as possible, don't we? 

Wang Dang SP's picture

Maybe a laser that moves vewy, vewy swowly.

flaminratzazz's picture

I am still pizzed off from the lack of flying cars. The fvkers are holding out on us..

Mustafa Kemal's picture

Maybe we could have

A "day without a government employee" day

Logan 5's picture
Logan 5 (not verified) Looney Mar 28, 2017 11:38 AM

"Given a choice between Government Shutdown and Chinese Food, I’d always choose the former."


No arguments, but ~ FFS


Chinese Food is basically Italian food


You swap out: tomato, olive oil, cheese, & herbs


& substitute in: fermented soy, sugar, ginger, pepper flakes, sesame oil, & a few crunchy veggies

DeathMerchant's picture

Marco Polo is responsible for that.

I am Jobe's picture

Me too. How about State as well. Who cares, bunch of leaches. Only emergency services needed. 

DeathMerchant's picture

Emergency services requiring proof of federal taxes paid.

tmosley's picture

Could happen. Way I understand it is that if the government can't pay its bills, the President gets to decide what government services/creditor payments are vital, and which aren't. Suspect this would be a good environment for Trump to affect much of his plans for reduction in the size of government.

With the hiring freeze already in place, anyone who quits their government job after not being paid won't be replaced when the government starts up again.

flaminratzazz's picture

Shut off ebt, gov pensions, social security, medicaid/care and watch the total fvkin foam out from Elysium.

darkstar7646's picture

You're dead if that happens, and there's no reason for me not to see to that personally.

Hitlery_4_Dictator's picture

This better be a promise and not a warning.  

Dr. Venkman's picture

Why don't we shut down the government every other month. Sort of like a fast. Fasting is all the rage.


It wouldn't have to be a shut down intended to inflict the most pain, a la President Stompy Feet's park/WWII memorial shut down.


When that goes smoothly, we can advance to every month for a week.

Smedley's picture

Yeah right, those spineless wonders will fold their hand at the slightest resistance!

Too funny...


Ignatius's picture

Seems like there should be some implied liablity issues here in shutting down markets and inviting in The Apocalypse.

Lawyers?  Please pick up the courtesy phone.

VWAndy's picture

 As if the government/gravytrain getting shut down would be a bad thing?

Chupacabra-322's picture

Haven't we heard this exact same Criminal Song & Dance before?

Smedley's picture

True, but we have a REAL President now!


Unfund the garbage line by line!!


Peak Finance's picture

They my shut-down the "government"

but will they shut-down the printers?

They may drop it a few percent to scare people.


Coldfire's picture

Promises, promises.

Boscovius's picture

Freedom Caucus?  or Democrat Sympathizers/Co-Conspirators?

Ricki13th's picture

Lmfao Wall street dont care about risk anymore the vix is getting hammered as we speak just to squeeze out a green close and reak this little funk. 

Usura's picture

I have no objections to a government shutdown.  But the eventual restart should exclude the departments of education, energy, most of the EPA, and perhaps a good part of many others.  This is an opportunity for Trump that should not be wasted.

Buster Cherry's picture

None should get back-pay for the days off.

If this were put into practice, maybe they'de be better stewards of our money.

TalkToLind's picture

Don't y'all goyim worry, there's plenty of cash left in those gubermit retirement accounts to fund federal operations. There's enough dough in there for at least another 3 - 4 days.

LawsofPhysics's picture

Yep, "Full faith and credit"...

same as it ever was...

1stepcloser's picture

Ahhh hello, make them come to work and don't pay them...  Cause they don't work and get paid for it now....

Duc888's picture



Here's the crazy part... you could shut down the Dept of Education at the Fed level in it's entirety and the schools at the local level would not even notice it.


rejected's picture

They're the power behind stupid shit like this: From Drudge

Reduce a school budget because the percentage of whites exceeded 30 percent.

And it ain't gonna stop because Trump is Prez. When racism is redifined as equality as it has been in this POS nation then it's over,

Arrow4Truth's picture

They would notice when they didn't get their federal script, which pays them to dumb-down the young people.

RougeUnderwriter's picture

It won't matter. When Greece Exits, Ita-leaves, France votes for "The Pen" and the Euro collapses, the US markets will be the smallest turd on the pile and only place to go

rejected's picture

Shit is shit regardless of size.

Yukon Cornholius's picture

But if somebody ate corn the night before it's shit with corn.

silverer's picture

I think a 20 year shutdown should work out fine. People will have their country back.