One week into the federal government shutdown, the financial markets reacted negatively, but did they move to the depth investment director Chris Harkins thought they would?
“Sadly, yes,” said Harkins, SVP and Managing Director at Delta Trust Investments. “I don’t know if its good news that we’ve been here before or if it’s sad.”
Government reports were delayed after the shutdown kicked in, and by week’s end investors reflected their pessimism with market declines. The blue-chip Dow Jones Industrial Average fell 1.2% and the S&P 500 lost 0.1%. However, the NASDAQ rose 0.7%.
Harkins said investors’ skins are “getting a little thicker” but he is worried that a protracted Congressional battle over the budget and looming debt ceiling debate could spook investors to leave the market in a big fashion.
“If investors globally and domestically here in the U.S., if they feel this lack of confidence that we can’t get our act together, we can’t pay our bills – they will begin to sell government bonds. That raises interest rates and the stock market will be skittish – it’s already skittish to begin with – you’ll see pressure to sell at that point,” Harkins said.
He said a two-week to month-long shutdown will “get into the system” and play out in the U.S. and global economy in a negative way far beyond Wall Street.
“Clearly if this goes on a little bit longer, if it goes on for over a month let’s say, then you’re talking about some real confidence issues,” Harkins said. “Not only among the consumers, which are investors, but the larger pool of money going into investments and the stock market are the pension funds, large high net worth individuals. They will begin to probably start pulling money out.”
You can watch Harkins’ full interview below.