Global investors are growing uneasy as the U.S. government enters another shutdown, with no funding deal reached by Congress. While markets have typically shrugged off past shutdowns, this one feels different — potentially longer and more damaging, especially with President Trump’s push for mass firings instead of temporary furloughs.
Such job losses could raise unemployment claims and shake investor confidence at a time when the U.S. economy is already showing signs of weakness.
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Defense stocks, which have performed well due to strong government spending on weapons and technology, may now lose momentum. Companies like RTX Corp., Lockheed Martin, Boeing, and L3Harris had recently hit record highs, but investor enthusiasm may fade if spending delays affect new contracts.
“Fundamentals remain solid, but investor sentiment may dip,” said TD Cowen analyst Gautam Khanna.
Government service providers — including Booz Allen Hamilton, Leidos, and CACI International — could be more directly impacted. These companies rely heavily on federal contracts, and a shutdown often leads to delayed projects and lower revenue, especially if it drags on.
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The bigger risk lies in the broader economy. A long shutdown could slow economic growth and increase unemployment, which would hit cyclical sectors such as industrials and financials — industries that depend on a strong domestic economy. Analysts warn this could create broader market stress.
“If the shutdown is extended, it highlights deeper economic risks already in play,” said Matt Gertken of BCA Research.
Stocks in companies like Caterpillar and Deere, which have been recovering since April, could come under renewed pressure. These firms already face challenges like slowing manufacturing activity and rising tariffs.
For now, investors are watching closely, hoping for a resolution — but preparing for deeper market turbulence if the shutdown lingers.
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