Traders are getting more and more pessimistic about the government shutdown ending any time soon

As the government shutdown enters its fourth week, market pessimism about a speedy resolution to the impasse has grown substantially, based on the prevailing sentiment gleaned from prediction market data.

In particular, data from the “How long will the government shutdown last?” contract offered by Robinhood allows us to look at granular shifts in how traders perceive the negotiations to be going.

As it stands, based on pricing data current through Sunday, the median expected total length of the shutdown is now 44 days, bringing it to mid-November.

Prediction markets have become an increasingly monitored proxy to infer the percentage chance the market assigns to an event happening.

The priced-in chance of a shutdown lasting over 60 days has now hit 25%, which would mean the government is closed through at least the end of November.

Traders are somehow more pessimistic about the timeline for resolving the shutdown today than they were a little over a week ago.

On October 8, the median expected length of the shutdown in total was 23 days, implying traders expected the shutdown would continue for another 15 days. As of Sunday October 19, the median expected total length of the shutdown was 44 days, implying that traders are pricing in another 25 days of shutdown.

The Takeaway

If traders expected that a resolution to the negotiations was approaching, we would expect to see the number of days remaining in a shutdown decline. If traders price that negotiations are at a stalemate and conditions for a resolution are not moving, we would expect the number of days of the shutdown to increase at a rate of one day per day, and the days remaining to stay flat. Essentially, the market’s saying that we’re further away from a resolution to the shutdown than we were even a week ago, that the situation has deteriorated and not improved.