Markets Stay Volatile Amid U.S. Shutdown & Fed Uncertainty

Global markets are navigating a stormy week, buffeted by the twin headwinds of a U.S. government shutdown and mixed signals from the Federal Reserve. While investors still expect eventual rate cuts, growing uncertainty about timing, economic data freezes, and policy direction is fueling choppy trading.

What’s Driving the Volatility

• Shutdown-induced data gaps: With parts of the U.S. government shuttered, key economic reports — especially from the Labor Department — are on pause. That leaves both investors and the Fed with blind spots just when clarity is needed most. The Washington Post+2Reuters+2

• Futures reaction: As the shutdown kicked in, S&P 500 and Nasdaq futures dipped ~0.7–0.9%, reflecting growing nervousness over worsening fundamentals. Bloomberg

• Safe haven flows: Capital rotated into gold and U.S. Treasuries, with government credit default swap (CDS) spreads widening — a sign that markets are pricing in elevated policy and fiscal risk. Reuters+1

• Historical resilience vs new risk: In past shutdowns, markets often shrugged them off — average drawdowns were modest (~1.6%) and many indices recovered quickly. But the current climate is different: tighter policies, higher valuations, and more geopolitical stress squeeze room for error. Fox Business+1