Breaking Alert: The Biggest Threat to the Market Has Returned

Blotienso · 2026-02-12T19:34:43+00:00

The likelihood of a U.S. government shutdown has surged to nearly 96%. Democrats oppose spending bills until specific immigration-related demands are met, while Republicans want stronger enforcement. The increased debt ceiling means extended political disputes could lead to a prolonged shutdown, exacerbating liquidity issues and negatively impacting the economy. Past shutdowns have led to significant market liquidity withdrawals, raising concerns about severe consequences for financial markets.

Blotienso

2026-02-12 19:34:43

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The likelihood of a U.S. government shutdown this week has surged to nearly 96%.
Last week, that figure was only around 18%.
And this poses a serious liquidity risk to the market.
The Democrats have stated they will not pass the spending bill until these demands are met:
• Mandatory camera recording for all immigration officers.
• Banning officers from wearing masks during operations.
• Ending “mobile patrols” and tightening search warrant requirements when entering homes.
The Republicans have opposed these changes, arguing in favor of strict immigration law enforcement and protecting federal agents’ actions.
And here’s the danger:
The debt ceiling has been raised to $41.1 trillion.
This means politicians can argue longer without immediately disrupting government operations, which significantly increases the likelihood of a prolonged shutdown.
At the same time, all critical aspects of the U.S. economy are deteriorating.
The labor market, retail spending, and business bankruptcies are all worsening.
But why is the market affected?
When a government shutdown begins, the U.S. Treasury typically restructures the National Budget (TGA). To do this, they withdraw funds from the financial markets.
During the shutdown in October, the TGA increased by about $220 billion. That’s a liquidity withdrawal of $220 billion from the market, leading to a liquidity crisis.
If another government shutdown occurs and lasts longer, the impact of liquidity withdrawal will be much greater and could cause catastrophic consequences for the market.

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