Investors looking for a reprieve after a rough stretch for the stock market may end up glued to news out of Washington this weekend, where a potential government shutdown looms. The House of Representatives has passed a continuing resolution to fund the government through September, but its prospects are unclear in the Senate , where the vote-counting math is less favorable to Republicans. The deadline is midnight Friday, which means that the House bill is the only viable option to avoid a shutdown, according to Roman Schweizer, policy analyst at TD Cowen’s Washington Research Group. “The House of Representatives has gone home. So even if the Democrats’ version — the 30-day CR — were to pass, there would still be a shutdown,” Schweizer told CNBC. Typically Wall Street can look through a disruption in the government. The S & P 500 has risen more often than not during a shutdown and has averaged a 12.1% gain over the following year, according to data compiled by Carson Investment Group. This time might not prove any different, but may threaten more chaos than other shutdowns. The Congressional negotiations have been overshadowed by concerns about a potential recession in the U.S. and a daily back-and-forth between the Trump administration and world leaders about tariffs. The shutdown, then, would prove just one of many things an already-spooked market needs to face. “The process in the Senate remains uncertain as the typical incentives have been jumbled since the inauguration of President Trump. Democrats typically rail against shutdowns, but only one House Democrat voted for the House CR,” Raymond James policy analyst Ed Mills said in a note to clients Tuesday. “Historically, government shutdowns have had limited market reaction. That is likely to remain the case, but adding to the significant amount of uncertainty coming out of D.C. is unwelcome in the current market climate.” The market environment hasn’t improved since Mills’ note. The Nasdaq Composite is now well into a correction — 10% below its recent high — and the S & P 500 did the same on Thursday . The Cboe Volatility Index , often called Wall Street’s “fear gauge,” was trading above 24 on Thursday after hanging around 15 a month ago. Another variable to consider is whether investors are losing confidence in the current administration. Recent comments from Trump and other officials suggested that the administration is willing to weather short-term pain in the stock market and economy to implement their policies. Treasury Secretary Scott Bessent said Thursday that his previous discussion of a ” detox period ” for the economy did not necessarily mean a recession, but the prospect of an economic slowdown has already moved to the front of investors’ minds. “We’ve been getting more and more questions from investors this week about whether Trump and his team are intentionally trying to cause a recession with these tariffs, along with DOGE cuts and other elements of their policy mix,” Wolfe Research analyst Tobin Marcus said in a Wednesday note to clients.
