CNBC’s Jim Kramer on Monday told investors why he believes government closures will not have a major impact on the market, reflecting on how stocks have responded to past closures. He said his main concern is that the closure will delay the release of key economic data informing the Federal Reserve’s decision on interest rates.
“My message is simple when it comes to government closures. Stock markets tend to work well in these situations, so stay calm and carry around,” Kramer said.
The forecast market prices around 70% of the time the federal government will be shut down on Wednesday as members of Congress do not agree to a suspension bill to maintain full funds on Tuesday. Democrats are sticking to demands that measures be included in bills protecting Obamacare’s health insurance subsidies, but Republicans argue that such debate should be held back until the closure is avoided.
Kramer admitted that the idea of a shutdown seemed uneasy, noting that this was effectively the first complete government shutdown since 2013. However, he pointed out that the market actually saw profits following two of the last three complete closures, suggesting that the government cited research from research from Anast, which suggested there was no identifiable trend in how stocks behave when the government ceased. Bank of America. He also said it is important to distinguish the shutdown from default on the debt cap. Cramer said the US could pay bond holders even if it was closed because lawmakers just raised their debt cap.
While stocks can survive the halt of all essential government activities, Cramer said the closure would seriously hurt federal workers. Analysts from several major banks predicted that the shutdown could have temporarily lost 800,000 or 900,000 people. Bank of America suggested that each week of shutdowns could knock 10 basis points out of GDP growth, Goldman Sachs 15 points predicted German Bank 20 points for proposal.
According to Cramer, these estimates indicate that a considerable number of Americans are not paid and are not willing to buy things. He said it may not have much impact on the one-week closure, but if the closure lasts three or four weeks, the wider economy could become a huge hit.
Cramer also said he was a little worried that the shutdown would delay the release of critical economic data, giving investors and the Fed less insight into the state of inflation and the labor market. The delay may not seem like a big deal, Cramer said, but central banks need information to decide whether to cut interest rates or not. Wall Street is hoping for another cut, but Cramer said the Fed may be more hesitant to do so without proper information. However, he also said the Fed could still be cut as closures are widespread and bad for the economy.
“I’m not worried about most of these things. My biggest fear is that closures could delay important economic data, make life more difficult for the Federal Reserve and postpone plans to cut interest rates,” he said. “I think it’s still a long shot. Honestly, if the biggest fear from government closures is delays in data collection, that’s not a reason to worry.”
