How The Government Shutdown Impacts Markets With Grays Peak Capital’s Scott Stevens

The government shutdown has now surpassed 20 days - and counting. With the longest partial shutdown lasting 35 days, the clock is ticking to get the budget passed before reaching that record.

The markets have yet to respond to the shutdown, and Grays Peak Capital founder Scott Stevens, formerly of SAC Capital, now Point72, and Coatue, shared some reasons why in a recent interview. He also explained how the repeated feuding between the two parties and repeated shutdowns are creating a new ecosystem in the private markets.

According to the firm's website "Grays Peak Capital is a global alternative investments firm currently managing assets across public and private markets for a diverse investor base of high-net worth individuals, family offices and institutions".

Tailwinds supporting the market, at least for now

Stevens notes that a number of cross-current forces are driving the market’s lack of reaction to the government shutdown, noting that the quarterly GDP is growing at an extremely high rate, well above current expectations. Thus, Stevens believes the economy is growing thanks to AI and technology, which is helping offset some of the weakness from the government shutdown.

Additionally, he said the tariffs are adding quite a bit of money back into the U.S., leading to a budget surplus for the quarter, and more interest rate cuts are on tap.

“We’ve now had one rate cut. There's an expectation of additional rate cuts, so that's typically positive for the equity market,” Stevens noted. “… I think the government shutdown, just because of the media and how public it is, obviously is something that people are looking at. But I think there's a lot of smaller and sub-stories of why the market has been holding up stronger than expectations that haven't been discussed probably as much as the government shutdown.

Also see: This Fund Is Up 2,000% Since Inception In 2022

Sectors most resilient amid the shutdown

While government contracts are understandably among the most exposed to the government shutdown, some other sectors are more resilient amid the situation. One of the initiatives where Stevens is seeing a lot of growth currently is onshore manufacturing, partially related to tariffs and partially related to national security.