It seems odd to think that we should now feel happier given that the responsibility for solving the immediate fiscal mess falls to the Senate. The House and the Senate Republicans have been at odds with each other publicly over the last several weeks. A significant part of the issue is the difference in electoral concerns for Senators when compared to the Representatives from the House. Larger electoral districts generally include more diverse sets of opinions and as a result the entirety of a state requires differing approaches from the House districts.
Reminder: I am not giving trading advice, just my interpretation.
Some of my students wondered why equity markets are not down more and at times look to potentially increase. Equity markets are an imperfect reflection of future economic prospects because there are company specific issues that could dominate national negatives.
I think we should expect a government shutdown. When you read the stances of the different leaders, and believe me I use the term loosely, it seems unlikely there will be any common ground found soon. One case is particular I will bring up is Harry Reid. As I look at the situation he faces I see little reason for him to soften his stance from a game theoretic perspective.
There are not many pictures that represent a truly positive outlook for the economy, which is to be expected coming out of a major crisis event like we saw in the U.S. and much of the world. However, if we believe that adjustments were necessary to fix what was wrong, then here is a hopeful picture.