Investors cheered the agreement to kick the can on short-term government
funding until Jan. 15 and to extend the debt ceiling until Feb. 7.
Stocks tumbled early in the week, rebounding strongly on Thursday, in
reaction to news of an imminent agreement to extend the federal debt
ceiling limit to late November.
Financial markets appear to be taking the government shutdown in stride,
without much alarm, but we see potential risks to the downside if a
budget/debt ceiling agreement is not reached soon.
Due to the Fed's announcement not to taper its bond-buying program, the
markets have shifted focus to the debt ceiling/government funding
showdown in Washington.
The Federal Reserve's surprise announcement that it would maintain its
policy of buying bonds led to rallies in stocks, bonds and gold.