Most government shutdowns don’t cause lasting damage. The stock market often holds steady or even rises, and the economy usually recovers once the government reopens. That’s because the U.S. keeps paying its debts, and most federal spending resumes quickly afterward.
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The bigger risk is a credit-rating downgrade — which becomes more likely when shutdowns drag on and political divisions deepen. Repeated standoffs over budgets and the debt limit signal to investors and rating agencies that Washington is struggling to manage its finances responsibly.
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That perception matters. If confidence erodes, the U.S. could face another downgrade like those seen in 2011 (S&P), 2023 (Fitch), and 2025 (Moody’s)—each of which caused spikes in borrowing costs and shaken markets:
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• 2011 – S&P downgrade: Stocks plunged over 6% in one day as investors demanded higher yields on U.S. debt.
• 2023 – Fitch downgrade: Treasury yields climbed as investors priced in greater fiscal risk, raising costs for mortgages and business loans.
• 2025 – Moody’s downgrade: Cited rising debt and interest burdens, pushing long-term yields higher and hurting sectors dependent on cheap financing like real estate and tech.
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Today’s conditions make another downgrade possible. The federal deficit remains near 6% of GDP, and debt is projected to reach around 127% of GDP within five years. Combined with ongoing political gridlock and tensions between the White House and the Federal Reserve, these factors threaten the stability that underpins America’s top-tier credit rating.

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****The ISM index shows how U.S. business activity rises above 50 in growth and falls below 50 in recessions. It’s been stuck near 50 since 2022 — signaling a weak, stagnant economy that’s barely avoiding contraction.****