The United States is once again on the brink of a government shutdown, raising serious concerns for investors both at home and overseas, warns the CEO of one of the world’s largest independent financial advisory and asset management firms.
Congress has so far failed to approve the required funding bills, with the deadline expiring tomorrow. Without a last-minute agreement, large sections of the federal government will be forced to shut down.
The looming impasse comes amid soaring deficits, a slowing economy, and political divisions deeper than at any point in decades.
Nigel Green, CEO of deVere Group, comments: “Gold prices have already surged to record highs as investors move into safe-haven assets. Treasury yields are oscillating, with history pointing to declines during shutdowns, but the political rancour and concerns over debt could push them higher this time. The US dollar, which remains the global reserve currency, is vulnerable to shifts in confidence.”
He continues: “Shutdowns are not the same as defaults, but they send a damaging signal about political dysfunction in the world’s largest economy.
“Investors everywhere are forced to reassess risk, and that has ripple effects across asset classes and geographies.
“Shutdowns in the past have tended to be short and economically manageable, yet this one is being viewed with more trepidation.”
Since 1950, the US has experienced 21 shutdowns, most lasting only a few days. The longest, between 2018 and 2019, stretched on for 35 days and resulted in an estimated $3 billion of permanently lost output. During that episode, the S&P 500 corrected, yields fell, and overall confidence weakened.
What makes the current risk more concerning is the wider context: slowing global growth, ongoing geopolitical shocks, and tighter monetary conditions.
“This is happening at a time when investors are already grappling with an unpredictable environment,” says Nigel Green.
“It magnifies volatility and could accelerate the flight of international capital away from US markets.
“We’ve already seen allocations to the US shrinking in recent times, and another political standoff could reinforce that trend.”
Another often-overlooked consequence of a shutdown is the interruption of government data releases.
Agencies may stop publishing crucial economic reports, including employment statistics and inflation data. Markets rely heavily on these indicators to gauge corporate earnings prospects, set expectations on interest rates, and shape currency valuations.
“Without them, speculation fills the void, raising the risk of mispricing and abrupt swings,” notes the deVere CEO.
“Investors base decisions on reliable information. If reports on employment or consumer prices are delayed, it doesn’t just inconvenience economists, it destabilises markets and complicates central bank policy. The absence of data at a critical time can cause lasting damage to sentiment.”
Equity markets are especially at risk. While short shutdowns are often shrugged off, longer ones can dent confidence and spark sell-offs. Companies reliant on government contracts or regulatory approvals may face revenue delays, while consumer confidence tends to slip, which can feed into lower spending and weaker earnings.
For international investors, the symbolism is as important as the direct impact. Although the US remains the largest and most liquid market in the world, repeated shutdown threats highlight political instability. This undermines the dollar’s role as a safe-haven asset and strengthens the case for diversification.
“Investors should not be paralysed by political drama in Washington, but they should be pragmatic,” says Nigel Green.
“Holding quality companies with strong fundamentals remains essential. Diversification across geographies and asset classes is more critical than ever. Alternative assets, including gold, are once again proving their worth as part of a balanced portfolio.”
Even if a temporary solution is found, the political gridlock in Washington shows little sign of easing. Long-term agreements remain elusive, and the deepening polarisation means the risk of future shutdowns is unlikely to disappear.
Nigel Green concludes: “Markets can live with economic cycles, even with inflationary pressures and shifting monetary policy.
“What undermines confidence most is dysfunction at the top. Every shutdown erodes the credibility of the US as a dependable steward of the global economy.”
