Listen to the full episode, here:
Key Points
- The immediate impact of the government shutdown was deemed minimal for the general public, though it was acknowledged to be difficult in the short term for furloughed federal employees who would eventually receive back pay.
- Essential services like the TSA, air traffic control, and the military were expected to continue operating, though potentially with reduced efficiency.
- John and Sam assert that the public had become less concerned about shutdowns over time, partly due to a better understanding that a shutdown is not the same as a debt default.
- The primary cause of the shutdown was identified as increased political polarization, with the current impasse centered on disputes over healthcare expenditures and ACA premium extensions.
- Both political parties were criticized for excessive spending when in power, contributing to the national debt and making budgetary conflicts more likely.
- Financial markets showed little reaction to the shutdown, with historical data suggesting that shutdowns have a negligible impact on average market returns.
- A major concern raised was the potential for the shutdown to delay the release of critical economic data from agencies like the Bureau of Labor Statistics, which could disrupt Federal Reserve policy decisions and create market uncertainty if prolonged.
- John and Sam discuss the long-term risk that repeated shutdowns could erode foreign investor confidence in the U.S. financial system, potentially leading to higher borrowing costs
John Norris (00:30):
Well, hello again, everybody. This is John Norris at Trading Perspectives. As always, we are good friends. Sam Clement —Sam, say hello.
Sam Clement (00:36):
John, how are you doing?
John Norris (00:36):
Sam, I’m doing fantastic. You know who’s not doing well?
Sam Clement (00:39):
Who’s that?
John Norris (00:40):
Maybe people that work for the federal government right now.
Sam Clement (00:42):
It’s day two now.
John Norris (00:44):
Day two of the federal government shutdown. That was telegraphed for a while, and I think a lot of people have a lot of ideas about what a shutdown is and what it isn’t. But I’ve got to tell you—like I told my friend Mike Doley at WBRC 6 the other day—it feels like we’ve been here before.
And Sam, in our industry, I’m supposed to say past performance is not indicative of future results. But if history is any guide, it’s going to suck. Pardon my language, but I’ll say it again: it’s going to suck.
For federal employees who are furloughed, maybe they miss a paycheck or two, but they usually get back pay. It’s awful in the short term. But longer term, once the dust settles and cooler heads prevail, there’s not much of a lasting change. For the average person not working for the government, it doesn’t have a huge day-to-day impact.
Sam Clement (01:47):
And even if you’re one of those people who misses a paycheck but gets paid back, if you can cover bills for a few weeks, it sort of feels like a paid vacation.
John Norris (01:59):
It kind of does. So what is a government shutdown? If you’re planning a trip to a national park, cancel your plans and save your money. Hotels probably won’t refund you, and the airlines won’t either. TSA still has to work, though maybe a little slower. Air traffic controllers and the military will be there. I’m not sure about DOT workers.
But again, if history serves as a guide, you see a lot of workers temporarily deemed “essential.” So, the average person doesn’t feel as much pain as Washington might want you to believe.
Sam Clement (02:57):
That’s an important clarification. Anecdotally, people seem less bothered by shutdowns now than in the past. Some of that comes from confusion—people think if the government shuts down at 12:01 a.m., that means we default on our debt.
John Norris (03:26):
No, no, no. That’s not what it means.
Sam Clement (03:27):
Right. So, clearing that up—that a shutdown does not mean default—is important.
John Norris (03:39):
Exactly. The impact depends on the shutdown: how many workers are deemed essential, how long it lasts, all of that. There’s no single definition. But we’ve lived through shutdowns before, and the sun still rises in the east the next morning.
Now, Sam, how did we get here? Why is the government shutting down? I won’t ask who’s to blame—that would pull us into politics and religion, and no one wants that.
Sam Clement (04:26):
But I’ll answer anyway: Washington is at fault.
John Norris (04:29):
There you go. The uni-party?
Sam Clement (04:32):
Sure. But really, it’s polarization. Politics as a whole has become so divided.
Sam Clement (04:42):
Looking back since the seventies, shutdowns have been common at times. There were several in the nineties and more recently too. 2013 was the one that really rattled people. Even when we don’t get a shutdown, we often get close—deals struck at the very last minute.
John Norris (05:18):
From what I’ve read—sources across the aisle—it seems this one boils down to healthcare costs. Democrats want to extend ACA-related benefits set to expire at year-end, because without them, premiums could spike in January. Republicans argue expenses must be cut.
No one wants to see massive premium spikes, but we also can’t keep spending unchecked. Both sides have a point. Historically, there would have been compromise: maybe phasing in changes, maybe grandfathering some coverage. But today, both sides are drawing harder lines.
So that’s where we are. It will get resolved eventually, but right now it’s a standoff over healthcare spending.
John Norris (07:24):
Talking to my wife Beth the other day, I said: at some point, we have to wean ourselves off government spending. The money won’t last forever. People need to get realistic about what we can and can’t afford. Right now, neither party is dealing with that.
Sam Clement (08:11):
I agree. Healthcare is today’s issue, but it’s always something. Both parties talk about spending cuts when they’re out of power. But when they have control, they spend too.
John Norris (08:35):
Exactly. When Republicans hold all the levers of government, they still spend.
Sam Clement (08:51):
They spend, spend, spend.
John Norris (08:52):
And that’s how we’ve wound up with $37 trillion in debt, heading toward $55 trillion in the next decade.
So, with this particular shutdown—what’s the practical impact on you, me, the markets, and everyday life?
Sam Clement (09:18):
Well, on me personally—I’ve got a flight Monday morning. You mentioned TSA. They’ll stay open, but maybe move slower. So I’ll probably get to the airport earlier.
John Norris (09:40):
That’s just human nature. If I weren’t getting paid, I’d drag my feet too.
Sam Clement (09:49):
Exactly. So the initial impacts are small—national parks closed, monuments closed. Maybe Washington uses it to fire some federal workers, but the day-to-day effect is limited.
John Norris (10:21):
That’s what Trump is hinting at.
Sam Clement (10:25):
Right. Whether he means it or is using it as a tactic remains to be seen. But overall, markets don’t react much.
Looking back since the seventies, shutdowns have had almost no measurable effect. I saw data from Truist: stock market returns during shutdowns average 0.0%. The week before or after, less than a percent. So markets tend to discount them.
John Norris (11:23):
Exactly. Even though we say past performance isn’t indicative, it often is. And investors generally believe cooler heads will prevail.
Take October 1st, 2025—stocks were up about 30–40 basis points. Ten-year Treasury yields actually fell a few basis points. If markets really thought this was catastrophic, you’d see the opposite.
Sam Clement (12:17):
Right. If there were fears of default, yields would spike.
John Norris (12:22):
Exactly. Falling rates tell you the bond market isn’t too worried.
Sam Clement (12:37):
Same with stocks—they’re looking past it. The bigger issue is if data releases get delayed.
John Norris (13:28):
Exactly. For instance, on October 2nd, 2025, the BLS didn’t release weekly jobless claims. Tomorrow, we may or may not get the September employment report. That’s a big deal, because monetary policy decisions rely on that data.
Sam Clement (14:05):
Right. That jobs report is one of the two most important data points driving Fed decisions.
John Norris (14:16):
And if the shutdown drags on, CPI might be delayed too. Without timely data, does the Fed have what it needs to act wisely? That’s the bigger question.
Sam Clement (15:14):
Exactly. Beyond this shutdown, if data becomes inconsistent, markets lose confidence. That’s what separates developed economies from emerging ones: reliable data. If confidence slips, borrowing costs rise.
John Norris (16:17):
That’s the long-term risk. Will shutdowns erode foreign investor confidence? We rely heavily on foreign capital.
Sam Clement (16:56):
Confidence is hard to quantify, but losing it puts upward pressure on yields. That’s partly why companies like Microsoft sometimes borrow at lower rates than the U.S. government.
John Norris (17:40):
Because businesses have incentives to manage money well. Government doesn’t.
Sam Clement (18:12):
Exactly. It all comes down to basic economics: if you spend more than you earn, you have to borrow the difference. And if confidence erodes, borrowing gets harder.
John Norris (19:02):
So simple, yet confusing for Washington.
Sam Clement (19:14):
Which brings us to the big question: will this happen again? I’d say yes—it’s almost guaranteed.
John Norris (19:38):
Not if, but when. As long as lawmakers ignore basic economics, shutdowns will keep happening.
Eventually, they’ll pass a short-term bill, but the pattern repeats. My guess? Another shutdown within two years.
Sam Clement (20:28):
I’ll take the under on that.
John Norris (20:30):
Fair enough.
So today we’ve talked about what shutdowns are, how we got here, the practical impact, long-term ramifications, and whether it’ll happen again. I’m sure we’ve missed something, and some people may think we don’t get it—but from our perspective, these are the likely outcomes.
Thanks as always for listening. If you have questions, drop us a line at or leave us a review on your podcast app of choice.
If you want more of our thoughts, visit oakworth.com under the Thought Leadership tab for access to past Trading Perspectives podcasts, our weekly blog Common Cents, our quarterly magazine Macro & Market Perspectives, and insights from our advisory team led by Mac Frasier.
Sam, anything else?
Sam Clement (21:52):
That’s all I’ve got.
John Norris (21:52):
That’s all I’ve got too. Y’all take care.
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