Unlike 10-15 years ago when events like the 'fiscal cliff' caused significant market fear, government shutdowns no longer move derivatives markets. Investors now view them as short-lived, pre-negotiated political theater with no real impact on market fundamentals, and even perceive them as bullish.

A surge in IPOs and M&A isn't driven by pro-business policies, but by a reduction in policy uncertainty. With a clearer, albeit more interventionist, landscape, companies have the confidence to execute major strategic plans they had previously postponed.

Shutdowns pause the release of potentially bearish economic data and pressure the Fed to be more cautious, supporting liquidity. Markets now discount these events, seeing them as temporary political theater with a predictable resolution, unlike in the past when they caused fear and hedging.

The U.S. intervention in Venezuela reflects a broader domestic trend of fast, unilateral policymaking via executive authority. This pattern bypasses congressional consensus-building, heightening policy uncertainty and systemic risk premiums for investors across all sectors.

Financial markets are likely to treat a potential government shutdown as temporary noise. Such events do not typically reprice the fundamental path of corporate earnings, inflation, or Federal Reserve policy, which remain the dominant drivers of asset performance. Investors will likely look past the disruption.

With major US policy variables like tariffs and fiscal stimulus now more defined, investors should shift focus from predicting policy direction to analyzing how businesses and consumers react to these established policies, as this will drive market outcomes.

Even if Democrats win the House, their majority would likely be too slim to significantly change policies that impact market pricing. Similarly, a plausible Republican agenda like more tax cuts would face internal party opposition from fiscal hawks, suggesting a continuation of policy gridlock regardless of the outcome.

The current market boom, largely driven by AI enthusiasm, provides critical political cover for the Trump administration. An AI market downturn would severely weaken his political standing. This creates an incentive for the administration to take extraordinary measures, like using government funds to backstop private AI companies, to prevent a collapse.

Despite expected legislative gridlock, investors should focus on the executive branch. The president's most impactful market tools, such as tariff policy and deregulation via executive agencies, do not require congressional approval. Significant policy shifts can therefore occur even when Congress is divided and inactive.