Birling Capital warns of unseen risks as shutdown enters 40th day
As the federal government shutdown extends into its 40th day, a recent report by Birling Capital has proved accurate in forecasting the economic and market fallout of prolonged political gridlock.
In “Government Shutdown 2025: The Hand Grenade Standoff, Market, Economic and Strategic Implications,” Birling Capital President and Chief Executive Francisco Rodríguez-Castro described the standoff as a “slow-motion shock” — one that tests “America’s economic resilience” more quietly than a full-blown crisis but with potentially deeper consequences.
“A shutdown doesn’t erase funds, but it delays execution, adds costs and erodes investor confidence,” Rodríguez-Castro wrote. His analysis argued that even when financial markets appear unfazed, the underlying economy begins to weaken in ways that are not immediately visible.
The data blackout created by the closure has deepened. Key economic reports from the Bureau of Labor Statistics and the Bureau of Economic Analysis remain suspended, leaving the Federal Reserve and investors “operating using limited signals from regional surveys and private-sector nowcasts,” the report said. The result, Rodríguez-Castro warned, is a “fog-of-war phase” for policymakers, a period in which economic navigation must rely on fragments rather than complete datasets.
That fog is growing thicker. The University of Michigan’s consumer sentiment index fell sharply in early November to 50.3, its lowest reading in more than three years. The Federal Aviation Administration has reduced air-traffic capacity by 10% in 40 high-volume markets due to staffing shortages, while the Supplemental Nutrition Assistance Program has reported delays in distributing benefits to millions of households.
Birling Capital estimated that each week of the shutdown could cut between 0.1% and 0.2% from U.S. gross domestic product growth. The Congressional Budget Office has since projected total losses of up to $14 billion if the funding lapse continues through the end of November. The report also noted that, at the time of its publication, the Atlanta Federal Reserve’s GDPNow model estimated 3.9% third-quarter growth, signaling that the economy’s broader momentum had not yet stalled despite fiscal disruptions.
Despite the disruptions, financial markets have remained calm. The S&P 500 closed last week with a modest gain, continuing a pattern of resilience that began on the first day of the shutdown. The VIX volatility index remains subdued, suggesting that investors still view the episode as political noise rather than a structural threat.
Rodríguez-Castro cautioned, however, that such steadiness could mask underlying fragility.
“The longer the data stay dark,” the report said, “the harder it becomes to separate resilience from fragility.” He urged investors to maintain discipline and liquidity while avoiding overreaction, advice that has largely defined market behavior so far.
Rodríguez-Castro has previously warned that federal delays could affect reconstruction efforts in Puerto Rico, where contract approvals and reimbursements have slowed, raising concerns among local businesses and lenders.
For Rodríguez-Castro, the impasse represents less a fiscal crisis than a test of institutional resolve. He likened the situation to “both parties clutching a hand grenade,” a metaphor for mutual political risk that has gained new relevance as the stalemate drags on. “The question,” he wrote, “is who pulls the pin first.”
The report noted that markets often recover once shutdowns end. Historically, equities have posted gains in more than half of past closures and risen more sharply in the year that follows. But this time, the duration and scope of the funding lapse could challenge that pattern.
While consumer spending and job growth have so far held steady, economists warn that sustained uncertainty could weaken confidence and delay business investment. Rodríguez-Castro said patience, not panic, remains the sounder approach, but warned that extended inaction could eventually test even the most disciplined strategies.
“The economy’s strength,” he wrote, “is not built in the halls of Congress but in the productivity and confidence of its people.”
Whether that confidence endures may depend on how much longer Washington’s “hand grenade” remains armed.
