This year has been anything but dull. At the end of Q1 2025, we were discussing the impact that new trade policy and tariffs were having on the economy. At the end of Q2 2025, we were looking at how the One Big, Beautiful Bill Act (OBBBA) would impact taxes, fiscal policy and healthcare.
Now, just as the U.S. economy teeters between uncertainty and record financial markets territory, the end of Q3 2025 brings a new wrinkle – a federal government shutdown.
The partial government shutdown, which started on October 1st, has the potential to put a pause on a relatively positive economic trend that included the first interest rate cut of 2025, and a six-month rally of the financial markets. Its impact will be determined by how long the shutdown lasts.
The last government shutdown (and the longest on record) occurred during President Trump’s first term, starting in December 2018 and lasting 35 days. That shutdown was estimated to cost the U.S. economy $11B, with $3B permanently lost, per the Congressional Budget Office. However, considering the size of the U.S. economy (~$21.5T at the time), it wasn’t particularly significant. GDP in 2019 was estimated to be 0.02% lower because of the shutdown than it otherwise would have been.1 If the current shutdown follows a similar trajectory, it’s unlikely to have any significant impact on the broader economy.
One concern about a prolonged shutdown may hinge on overall market sentiment amid a softening labor market, rising unemployment, lost income for federal workers (during the shutdown), all potentially impacting consumer confidence and spending.
For insurance brokerage mergers and acquisitions (M&A), an extended government shutdown may add some minor friction to deal execution in the form of delays in federal regulatory approvals, or more caution by private equity buyers should further interest rate cuts be delayed. But short-term deal activity should maintain its current appetite and trajectory towards perhaps the second or third highest volume year on record.
