US shutdown may create buying opportunity
Escalating fears that the U.S. government may partially shut down has led to selling in Asian and European stocks and led to a drop in U.S. stock futures. But the uncertainty could lead to a perfect buying opportunity and an ideal route back into this year's stock market rally, according to one money manager.
Forty five percent of CNBC readers who voted in an online poll on Monday said they would go short the S&P 500 because of the looming government shutdown. But Michael Yoshikami, founder and CEO of Destination Wealth Management, told CNBC that he's biding his time in the hopes of getting back into the market.
(Read More: As US shutdownlooms, how will you trade S&P 500 ?)
"It's an opportunity," he said. "In the end you still have a market that is, at worst, fairly valued and you have nowhere else to go. If you are into fixed income you are losing money. Money market here makes nothing."
Yoshikami believes the shutdown is just posturing and said investors should buy some blue chip stocks if there is softness in the market this week.
U.S. politicians have been unable to reach an agreement on budget spending and face a deadline of midnight on Monday, after which the government will shut down, resulting in 800,000 federal employees being put on temporary leave.
(Read More: US budget uncertainty may limit gold's decline)
The Republican-controlled House of Representatives early on Sunday passed a measure that ties government funding to a one-year delay of President Barack Obama's landmark health care restructuring law, also known as "Obamacare".
But according to Reuters, Senate Democrats have vowed to quash it at last ditch talks on Monday. If a spending bill for the new fiscal year is not passed before midnight on Monday, government agencies and programs deemed non-essential will begin closing their doors for the first time in 17 years. Goldman Sachs has estimated that any shutdown would cost the government around $8 billion a week.
Central to negotiations has been a medical device tax intended to help fund "Obamacare". But with the last minute political wrangling continuing, Yoshikami believes there could be a market play on the cards.
"I would not be surprised to see a modification of that tax, so companies like J&J, Boston Scientific, companies that are in this space certainly could benefit from a change in that medical device tax," he said.
Clifford Bennett, managing director of the White Crane Group, also said he was looking at buying opportunities.
"This is starting to get really interesting!," Bennett said in a research note on Monday.
"I think a U.S. shut down for a day or two would be a lot of fun! Markets will over react and generate last minute buying opportunities in our grand bull market!"
Bennett believes investors should buy "aggressively" if the shutdown begins. Any downside in growth resulting from the political fracas would be equal to a couple of severe summer thunderstorms in the north east of the country for a couple of days, he added.
(Read More: US government shutdown: How will markets react?)
"There may even be increased consumption, government workers with a day or two off, and there will probably be, in true American fashion, catch up over spending by government departments when the situation is resolved," he said.
The S&P 500 Index has risen over 18 percent year-to-date despite several dips on fears the U.S. Federal Reserve may be ready to pull back its stimulus program. The Dow Jones has surged over 16 percent, the Nikkei has climbed 41 percent and the pan-European Euro Stoxx 600 has joined the rally with a rise of 11 percent.
Ishaq Siddiqi, a market strategist at ETX Capital, told CNBC that negotiations over the debt ceiling and a possible government shutdown will effectively mean Fed "tapering" is off the table in the near term and liquidity loving junkies will love the news.
"Quantitative easing sticking around for longer which means market still filled with ample liquidity," he said. "We think there's certainly a buying opportunity."
Political uncertainties in Italy are also weighing on European markets and if both can be resolved, he said, then ETX would recommend buying when the S&P 500 hits 1,630 and the U.K.'s FTSE 100 hits 6,400 points.
—By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81