If a new budget is not passed by January 30, 2026, the U.S. government may face a partial shutdown. This uncertainty is causing volatility in the markets.
Main 4 risks:
1. Data blackout: Important economic data releases such as inflation CPI and job stats will be halted, preventing the Fed from making informed decisions.
2. Credit Rating: If the shutdown is prolonged, there is a risk of a downgrade in the U.S. sovereign credit rating, which could reduce the dollar's liquidity in the global market.
3. Liquidity Crisis: There may be a cash crunch in the banking system, which can be understood if the SOFR-IORB spread increases, raising the cost of loans.
4. Impact of Recession: GDP may decrease by about 0.2% each week of the shutdown, which could push the current fragile economy into a recession.
Market Performance:
Positive: $AUCTION
Investors are currently turning to safe assets like gold and silver.