US shutdown continues

It looks like interesting times across the pond in the US of A.

Political failure to reach agreement on a budget deal, due to wrangles over President Obama’s healthcare bill (dubbed ‘Obamacare) have resulted in a partial shutdown of the US government.

Non-essential government operations were closed on Tuesday evening and remain closed today, as President Obama and Congressional leaders fail to break a budget deadlock.

As a result, over 700,000 US government employees are now on unpaid leave.

National parks, tourist sites, government websites and government office buildings across America are closed.

All of this could be quite damaging to the US – and therefore to the global – economy.

One analyst has suggested that a prolonged shutdown, lasting three weeks, could knock 0.9% off the value of the US economy during this quarter.

However, the real focus for investors should probably be on a date in the not too distant future, 17th October 2013.

This is when the debt ceiling becomes a real issue again. Failure to extend the debt ceiling would stop coupon payments on bonds and create a technical default, leading to a riot in bond markets.

As has often been the case with investment markets in recent years, there are interesting days ahead.

Investors with a well diversified portfolio which is designed to meet their long-term financial goals and objectives should have no real concerns about this short-term incident.

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