2025-11-11
Deep Dive into the Short-Term Market Turbulence from the US Government Shutdown
As of early November 2025, the U.S. government shutdown has lasted for more than 40 days, marking the longest in history and triggering significant market volatility. Over the past week, the S&P 500 Index fell by about 1.6%, while the Nasdaq Composite dropped 3%, recording its steepest weekly decline since April. The slump reflects a clear decline in investor risk appetite.
The shutdown stemmed from Congress’s failure to pass annual appropriations bills on time, and deepening political divisions have further heightened market uncertainty. Investor confidence has weakened, and the high valuations of tech stocks have led to particularly poor performance in the Nasdaq. Meanwhile, tightening liquidity in the Treasury’s cash accounts has added pressure to overall market funding conditions. However, a recent bipartisan agreement in the Senate to extend government funding through the end of January 2026 has helped avert a more severe crisis, slightly easing short-term market concerns. Historical data suggest that if a shutdown ends within a few weeks, the stock market typically rebounds quickly; a prolonged one, however, could dampen corporate investment sentiment. With signs of a gradual government restart emerging, expectations for market stabilization have increased.
In the short term, if the shutdown crisis is resolved, market confidence is expected to recover gradually, potentially driving a rebound in equities. Nonetheless, lingering political divisions and economic uncertainties continue to pose risks of volatility. Medium-term focus will be on the progress of budget negotiations and the recovery of economic indicators. Investors should remain cautious about the potential drag of the shutdown on corporate earnings and consumer confidence, while also monitoring the implications of the U.S. debt and fiscal deficit. Overall, once the government fully reopens, market performance will rely more on fundamental factors, with volatility likely to gradually subside.