Washington's politicians may disagree, but Goldman Sachs thinks Congress's failure to strike a budget deal, and the resulting government shutdown, is nothing for markets to panic over.
In fact, the risk-off momentum may offer investors a chance to bet the economic upturn will continue.
Markets have taken a bearish turn since Congress failed to set a new budget by Monday's midnight deadline, resulting in a partial government deadline which has left around 800,000 federal employees on unpaid leave. Equity prices are well off the highs reached after the last Federal Reserve meeting (when the central banks surprised markets by failing to announce a start to tapering), bonds yields have rallied, safe haven currencies have strengthened and emerging markets have weakened.
But Goldman Sachs — basing its forecast on recent data, its forward outlook and past government shutdowns — believes the markets' jitters would likely prove short-term.
"Past experience suggests that markets tend to take these sorts of events in stride… While risk-off moves can persist, and catalysts that improve sentiment are hard to discern in advance, we see little that causes us great concern," said Goldman analysts led by Dominic Wilson in a research note out on Wednesday.
(Read more: Three pressure points that may end the shutdown)