Navigating Uncertainty: How a Government Shutdown Could Impact U.S. Markets and Credit Ratings

Potential Market Risks Emerge as U.S. Government Shutdown Gains Attention on Trading Floors

September 29, 2025 — Past shutdowns saw calm markets. New signals hint that this shutdown may bring more risk. Traders and economists share their worry.

Background and Current Situation

The U.S. nears a shutdown deadline on Wednesday. Traders talk about a possible drop in the economy. On Monday, the Labor Department made plans that expect little news if government work stops. This step shows the government stays ready as doubt grows. President Donald Trump meets with top Congressional leaders to try to reach an agreement before the deadline. He warns that many federal workers may lose their jobs if the shutdown goes ahead. This warning sets the event apart from past shutdowns.

Credit Rating Concerns: A Growing Risk

Market talk now points to a shutdown that may harm the U.S. credit rating. In May 2025, Moody’s lowered the rating from Aaa to Aa1. It argued that political issues may hurt the economy. Extra cuts may come if:

Policy strength drops.
U.S. institutions lose power.
The economy shows less strength.
Global markets shift away from the U.S. dollar.

JPMorgan’s traders note a risk tied to the shutdown. They see that more cuts can harm U.S. Treasury bonds. A lower credit score raises yields, makes loans more costly for companies, and cuts the value of future earnings. This change may put pressure on the stock market.

Market Reactions and Analyst Views

Bond traders and economists keep a careful eye on the news. Chris Rupkey from FWDBONDS said a further downgrade feels like a small detail. He noted that Treasury bonds have stayed strong during past cuts. Rupkey trusts that Treasury Secretary Scott Bessent can act fast if the risk grows. Joe Brusuelas from RSM doubts a new downgrade will happen. However, he warns that a long shutdown might slow hiring and investments. In his words, "Market participants have grown used to Washington’s ongoing fiscal errors."

Historical Context

Previous U.S. shutdowns did not shake the markets much. Today, however, a mix of political splits and economic doubts makes this shutdown stand out. Investors now watch closely for signs that government troubles might shake faith in U.S. money plans.

What’s Next?

Time runs short as leaders try to reach a deal before the deadline. The next few days will show if the shutdown triggers more than just basic work interruptions. It could affect credit scores, Treasury yields, and overall market calm.

Key points to watch in the coming days: