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The Shutdown Aftershocks: What Washington’s Next Moves Could Mean for Markets in 2026 Thumbnail

The Shutdown Aftershocks: What Washington’s Next Moves Could Mean for Markets in 2026

Women & Investing
Congress has ended the recent government shutdown, but the calm might be temporary. According to a recent report from Hartford Funds, three big issues could still rock Washington and the markets.


Key Risks on the Horizon

  1. Health-Care Battle: The fight over ACA (Obamacare) subsidies isn’t settled. Those tax credits expire on Dec. 31, 2025, and lawmakers are deeply divided on whether, or how, to extend them.
  2. Supreme Court Trade Decision: The Supreme Court is weighing a case that could limit the president’s power to impose tariffs. If the court rules against broad executive authority, it could reshape U.S. trade policy. 
  3. 2026 Midterm Uncertainty: With redistricting underway and political power shifting, both parties are positioning for big battles in the 2026 midterms.

What This Means for Markets

  1. The shutdown disrupted key economic data, making policy decisions harder and creating continued uncertainty. 
  2. These political tensions may fuel volatility in fixed-income markets, especially as investors try to predict the Fed’s next move.
  3. The Federal Reserve recently cut rates by 25 basis points, but not without disagreement.

The shutdown may be behind us, but the aftershocks aren’t over. Healthcare, trade, and political power struggles could continue to rattle policymakers, and markets,  well into 2026.

What Investors Can Do Now

  1. Stay diversified across asset classes. When political and economic uncertainty rise, having exposure to different types of investments, stocks, bonds, cash, and alternatives, helps reduce the impact of volatility in any one area.
  2. Favor quality. Periods of policy uncertainty often reward companies with strong balance sheets. Quality tends to hold up better when markets get choppy.
  3. Be cautious with interest-rate-sensitive assets. With the Federal Reserve divided and new economic data delayed from the shutdown, interest-rate forecasts are less reliable. Investors may want to keep bond duration balanced (not too long, not too short).
  4. Avoid making big bets on future rate cuts or hikes.
  5. Watch policy-sensitive sectors. Healthcare and trade-exposed industries may experience more volatility as decisions on subsidies and tariff authority unfold. Instead of trying to time these swings, many investors choose broad sector exposure. ETFs that reduce single-sector concentration.
  6. Build or maintain a cash cushion. Holding some cash, money market, or short-term Treasuries can help investors meet expenses without selling in a downturn.
  7. Take advantage of opportunities if markets dip through dollar cost averaging to mitigate risk and also set aside funds systematically each month.
  8. Focus on the long term. Political events can move markets in the short run, but long-term returns are driven more by earnings, innovation, and economic growth. A long-term plan helps keep short-term noise in perspective.
  9. Review your allocation with a professional. Given how quickly policy outcomes can shift, this is a good time for investors to check whether your portfolio still matches your needs, goals, risk tolerance, and time horizon.

This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.