The ongoing US shutdown and worries about a trade war induced economic slowdown in China and the US continue to drive shares lower in the US while measured for the week, the US market saw stocks higher by about 2 percent. While the Dow rose 2 percent the Nasdaq Composite jumped 3.45 percent. Note that this week was the calmest week in the US stock market in over a month.
This was the fifth day without the S&P 500 moving in either direction more than 1 percent in either direction making this the longest quiet week since October. As you know, market volatility in October jumped, as markets saw shocking moves in November and December. However, some market participants are calling for more volatility in the coming weeks and months. The volatility in markets will be long-term and in our view at Classiarius, funds will be better prepared to trade said markets in 2019.
The federal government remained partially closed for 21 days now, so this shutdown could drag on for weeks or even months. President Trump said he would not make the Economic Forum in Davos later this month due to the shutdown.
But for now, it seems that the US market is price searching and finding a base, while the shutdown costs the US economy 0.1 percentage points every two weeks according to Joseph Song, and economist at Bank of America Merrill Lynch. There will also be delays in spending and investment according to Song. And a closure of one month will cost the economy enough to pay for the wall – we hope the Democrats and Republicans come to a understanding soon.