Government Shutdown Averted… for Now

As usual, the U.S. government managed to pass a stopgap measure to avoid a complete government shutdown right before the deadline. This isn’t a time for investors to breathe a sigh of relief, however.

Here’s the scoop. On Friday evening, the Senate passed a continuing resolution for a national budget with a vote of 62 to 38, thereby exceeding the 60-vote requirement. The bill’s funding focuses on defense, immigration, and other areas while also defining spending cuts.

Interesting, the votes weren’t strictly along party lines. In fact, 10 Senate Democrats voted in favor of the bill, including Senate Minority Leader Chuck Schumer.

Most likely, stock market participants already saw this coming and consequently bid up share prices on Friday. This doesn’t mean investors should just assume that everything is fine, though.

For one thing, the stopgap measure only keeps the federal government open until September 30. Then, the drama and suspense will start all over again.

Furthermore, the bill only adds to America’s already considerable national debt load. Believe it or not, the U.S. government has already run up $1.1 trillion worth of new deficit spending in the first five months of the current fiscal year. This new bill will likely add $7 billion to that total.

Courtesy: @ShangguanJiewen

In reality, the ticking time bomb isn’t the prospect of the government shutting down for a while. It’s the other shoe finally dropping when America’s creditors come to collect on the massive, unmanageable bill.

Shifting back to the topic at hand, however, the House of Representatives already passed the stopgap economic bill by a vote of 217 to 213. So, for what it’s worth, this resolves the government shutdown issue until September.

President Trump reminded Americans that 2025 will still be an eventful year, to say the least. “The big Tax Cuts, L.A. fire fix, Debt Ceiling Bill, and so much more, is coming,” Trump wrote.

So far this year, volatility has been the norm in the stock market. The same NASDAQ stocks that propped up the large-cap indexes have been shaky, notwithstanding Friday’s huge price move to the upside.

Resolving the government shutdown threat for the next six months doesn’t permanently solve the problem of a bitterly divided Congress. Nor does it assure a smooth ride for the economy and markets in the coming months.

You know who’s been sitting pretty during these volatile times? Folks who’ve been holding gold and silver have enjoyed excellent returns lately on their investments.

Perhaps you’ve noticed that central banks are buying precious metals at a fast pace. Central banks and other institutions reportedly purchased a record 210 tonnes of gold on the London OTC market in January, versus the pre-2022 average of just 17 tonnes:

Courtesy: ZeroHedge

This spike in demand for gold isn’t just a matter of diversification. It’s also a function of uncertain sentiment toward future outcomes of the global economy.

Even as gold hits new all-time highs and silver quickly gains value against the dollar, it’s not too late to consider owning some hard assets. The prices of precious metals could run much higher when retail investors start panic-buying.

We haven’t seen the panic-buying phase yet, and these events tend to happen suddenly. So, with the next make-or-break crisis possibly right around the corner, don’t be surprised if gold and silver catch a bid soon.