Goldman Sachs Predicts End of US Shutdown in Two Weeks — Fed Rate Cut in December Gains Momentum

The impasse in the US government that has paralyzed part of the government may be nearing its end. Following Citi, it is now Goldman Sachs that projects a resolution to the so-called shutdown "within two weeks" — a crucial factor for the next decisions of the Federal Reserve (Fed), the North American central bank.

Key Points of the Goldman Sachs Report

According to analysis released by the Trading Desk, the latest report from Goldman Sachs indicates that the partial closure of the federal government, which has been ongoing for several days, is starting to show signs of resolution. The bank projects that the impasse should be resolved by the second week of November.

Factors Pressuring Congress

Among the elements that accelerate the pressure for a solution are:

1. Damage to Essential Services

Air traffic controllers and airport security agents have already lost their first payment on October 28, increasing the risk of massive flight delays.

The experience of the 2018-2019 shutdown showed that delays of this type are a strong catalyst for the resumption of government activities — in that case, the chaos at airports was decisive in ending the impasse.

2. Direct Social Impact

SNAP program payments were interrupted, even after judicial authorization for emergency fund use. Millions of American families depend on this program for basic nutrition.

3. Internal Political Pressure

Congressional salaries were affected, significantly increasing the urgency for an agreement. When lawmakers feel the impact on their wallets, negotiations tend to accelerate.

4. Strategic Calendar

• State elections on November 4
• Parliamentary recess scheduled for November 7

These events create a critical window for negotiation, as no politician wants to face voters during a prolonged shutdown.

Effects on Monetary Policy: Will There Be a Rate Cut in December?

The duration of the shutdown is seen as a central factor in the Fed's decisions. Both Citi and Goldman Sachs agree: with the government reopening in two weeks, the release of key economic data will resume, and the central bank will have up to three employment reports before the decisive December meeting.

Projections from Financial Institutions

Citi

Maintains its optimistic projection:

• Rate cut in December: -0.25 percentage points
• New cuts: January and March 2025
• Justification: Complete economic data will allow for a well-founded decision

Morgan Stanley

Warns of three possible scenarios:

Scenario 1: Shutdown ends next week

• Fed will have access to complete data (employment, inflation, retail sales)
• High probability of rate cut
• Markets will react positively

Scenario 2: End in mid-November

• Data will be more limited but still sufficient
• Fed may consider a rate cut with reservations
• Decision will depend on the quality of available data

Scenario 3: End only after Thanksgiving

• Data will be scarce and outdated
• Higher chance of delay
• Markets may react negatively

Why This Matters

The Fed relies on up-to-date economic data to make decisions about interest rates. Without reports on:

• Employment (payroll)
• Inflation (CPI, PCE)
• Retail sales
• Industrial production

...the central bank will be "flying blind," making it risky to adjust monetary policy.

Impact on the Economy: Will the 4th Quarter GDP Be Affected?

The Goldman Sachs report also highlights the economic cost of the shutdown. The projections are concerning but with a perspective of recovery:

Projection of Impact on GDP

If the shutdown lasts for 6 weeks:

• Reduction: -1.15 percentage points in the annualized growth rate of real GDP
• Q4 2025 GDP: 1.0% (vs. 2.15% previously projected)
• Most affected sectors: Government services, tourism, aviation

Temporary Effect with Recovery

However, this effect tends to be temporary. Compensation would come in the first quarter of 2026:

• Q1 2026 GDP: 3.1% (significant increase)
• Reason: Resumption of government activities
• Backlogged payments: Released at once
• Repressed consumption: Returns with force

This pattern of "decline and recovery" has been observed in previous shutdowns, especially in 2013 and 2018-2019.

Historical Analysis: Lessons from Previous Shutdowns

2018-2019 Shutdown (35 days)

• Duration: Longest in US history
• End: Chaos at airports forced an agreement
• Impact on GDP: -0.4% in Q4 2018, complete recovery in Q1 2019
• Lesson: Essential services are the pressure point

2013 Shutdown (16 days)

• Impact: -0.3% on GDP in the quarter
• Recovery: Complete in the following quarter
• Estimated cost: $24 billion in lost economic activity

Common Pattern

All modern shutdowns follow a pattern:

1. Initial phase: Limited impact, optimistic expectation of quick resolution
2. Critical phase: Essential services affected, pressure increases
3. Resolution: Last-minute agreement before total collapse
4. Recovery: Rapid, usually in the following quarter

What This Means for Investors

Stock Market

• Short-term: Volatility until resolution
• Medium-term: Relief rally after agreement
• Benefited sectors: Defense, infrastructure, government services

Bond Market

• Treasuries: May benefit from rate cut
• Yields: Tendency to decrease if Fed cuts in December
• Opportunity: Positioning before the Fed's decision

Dollar

• Bearish pressure: Rate cut weakens USD
• Global impact: Emerging currencies may strengthen
• Commodities: Gold and oil tend to rise

Cryptocurrencies

• Bitcoin: Historically benefits from rate cuts
• Liquidity: More money in the system favors risk assets
• Correlation: BTC has followed the stock market recently

Timeline: What to Expect in the Coming Weeks

Week of November 4

• State elections: Increased political pressure
• Intensive negotiations: Congress seeks agreement
• Economic data: Some reports may be released

Week of November 11

• Critical deadline: Goldman Sachs projects resolution
• Parliamentary recess: Additional incentive for agreement
• Markets: Expected positive reaction

December

• Fed meeting: December 17-18 (likely)
• Rate decision: 0.25% cut expected
• Statement: Guidance for 2026

Conclusion: Cautious Optimism

The projections from Goldman Sachs and Citi bring optimism for a quick resolution to the shutdown, opening the way for the long-awaited Fed rate cut in December. However, investors should remain alert to:

Positive Factors

• Political and social pressure for resolution
• History of quick shutdown resolutions
• Robust economic data (when available)
• Fed prepared to act

Risks to Monitor

• Political impasse may prolong
• Economic data may surprise negatively
• Inflation still above the Fed's target
• Global geopolitics uncertain

Recommendation

Stay informed about:

• Congressional negotiations
• Economic data releases
• Fed communications
• Market reactions

Sources and References

• Goldman Sachs Research: Economic Analysis Report
• Citi Research: Monetary Policy Projections
• Morgan Stanley: Fed Scenarios
• Trading Desk: Market Analysis
• Federal Reserve: Official communications

Your Opinion

What do you think? Will the shutdown be resolved in two weeks? Will the Fed cut rates in December? Share your opinion in the comments!

Stay Updated with the Latest Economic and Market Analysis

Subscribe to our newsletter to receive exclusive content directly in your email!

Disclaimer

This article is for informational and educational purposes only. It does not constitute financial advice. Always do your own research before making investment decisions.

Start Investing in Cryptocurrencies

To buy the cryptocurrencies mentioned in this article, use one of the recommended exchanges: