U.S. Budget Stalemate Deepens as Partial Government Shutdown Drags On

• The U.S. government shutdown, now over three weeks old, shows no sign of resolution as Republicans and Democrats remain deadlocked
• Economic impact remains limited, reducing GDP by about 0.3 percentage points so far, though risks rise with each passing week.
• Key federal programs like WIC and SNAP could run out of funds by late October or early November.
• Historically, short shutdowns have had minimal impact on stock markets; major indices remain stable amid strong fundamentals.

More than three weeks after the partial shutdown of federal institutions began on October 1, Washington remains mired in political gridlock. Republicans and Democrats have yet to find common ground, with the Senate on Monday rejecting for the eleventh time a stopgap funding bill that would have temporarily reopened the government. As a result, the federal administration will stay partially paralyzed for at least several more days.

Market observers are increasingly betting that the impasse could extend into November, potentially making it one of the longest shutdowns in over half a century. Most government statistical agencies have halted data releases, with the notable exception of Friday’s September CPI report — essential for calculating adjustments to Social Security benefits.

As the shutdown drags into its third week, pressure on Congress is steadily building — from both the public and within federal institutions themselves. Each day without a funding deal adds to the political toll for both parties while deepening uncertainty for millions of Americans whose livelihoods or benefits depend on federal programs. With key deadlines approaching at the end of October, the sense of urgency in Washington is intensifying.

The next scheduled payday for federal employees falls on October 24. If lawmakers fail to reach an agreement by then, thousands of government workers will again go without pay. A week later, on October 31, the military faces its own payroll deadline — a payment last met only through a controversial reallocation of Department of Defense funds. Even greater pressure will mount on November 1, when open enrollment begins for ObamaCare health insurance programs that cover roughly 24 million Americans. Without renewed federal subsidies, premiums could jump by 75 to 100 percent, imposing a heavy burden on households already strained by elevated living costs.

For now, however, both parties remain firmly entrenched. Polls indicate that Americans largely blame both sides equally, reducing the political incentive for compromise. President Trump has so far refrained from direct involvement in negotiations — a factor that only complicates efforts to end the stalemate.

Analysts estimate that each week of the shutdown trims GDP growth by about 0.1 to 0.2 percentage points, implying a cumulative drag of roughly 0.3 percentage points so far. Yet the broader U.S. economy remains resilient: the Atlanta Fed’s GDPNow model still forecasts a 3.9% expansion in the third quarter. Since most federal workers eventually receive back pay, the overall macroeconomic damage has so far been limited.

If the impasse continues, however, the effects on consumer confidence and business sentiment will become increasingly pronounced. By November, the strain could intensify sharply. The WIC program — which provides nutritional support for about 7 million women, infants, and children — is projected to run out of funds, while the SNAP food assistance program could exhaust its financing by the end of October, jeopardizing aid for over 40 million Americans.

For now, the shutdown’s economic disruptions remain moderate. But with each passing week, the risks mount — and if no deal is reached by early November, escalating social and political pressure will likely leave lawmakers with little choice but to compromise

If the U.S. government shutdown — that is, the suspension of federal funding — lasts longer, the major Wall Street indices such as the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite could react in different ways.

What History Shows

From a historical perspective, short government shutdowns have had only a limited impact on the broader U.S. stock market. According to various analyses, during shutdown periods the S&P 500 has gained an average of about 4.4%, and in most cases, stock prices have remained positive even three to six months after the shutdown ended.

Investors tend to “care more about fundamentals than politics” — markets focus primarily on corporate earnings, Federal Reserve decisions, and economic growth prospects, rather than on the budget standoff itself.

This means that a short shutdown is unlikely to trigger a dramatic sell-off in the major indices. However, there is still a certain degree of risk (in my view, it remains rather limited) that a prolonged shutdown could lead to a broader correction on Wall Street. At this point, though, investors are behaving in a very predictable, textbook way — they are using every dip as an opportunity to take long positions and participate in the ongoing strong bull market on the stock exchange.

The S&P 500 index is currently experiencing another upward move, and we may soon witness an attempt to break through its historical highs. The recent, somewhat sharper decline only temporarily pushed the index below the lower boundary of its rising channel, marking local lows at horizontal support around 6,500 points.

A swift improvement in market sentiment turned the recent sell-off into a good opportunity to take long positions. From a technical perspective, it is now important to observe how the price behaves near the all-time high (ATH) level. If we see another round of profit-taking, a double top formation could emerge on the chart, which might serve as an early indication of a deeper and more prolonged downward correction.