Trading market signals positive: US government shutdown risk rapidly drops to 27%

Market traders have recently made an interesting judgment—they are betting that the U.S. government will not shut down by the end of January. According to Kalshi data, the probability of a government shutdown has dropped from 40-48% a few weeks ago to 27%, indicating that the market expects a high 71% chance of the government successfully reaching a funding agreement.

Why is there such a clear shift in traders’ attitude?

Several key factors underpin this shift. First, the large omnibus legislation passed in 2025 has pre-funded federal spending through September 2026, covering 85%-95% of federal expenditures. This means that most government departments and projects now have long-term funding guarantees, significantly reducing the scope of impact if a shutdown occurs.

Second, the political costs cannot be ignored. Members of Congress have just experienced a historic 43-day shutdown in November, leaving a deep impression on them. Republicans currently control the White House, the House of Representatives, and the Senate, which reduces the likelihood of legislative deadlock—history shows that a divided government is the main cause of shutdowns.

Rhetoric shows signs of easing

Senate Minority Leader Schumer and Majority Leader Schumer both stated before the holidays that they would push forward with appropriations. Even though President Trump has taken a tough stance publicly, warning against “ransom” tactics, the underlying political reality is driving all parties to seek compromise.

Economic consequences and policy incentives are fueling negotiations

Economic forecasts further reinforce the motivation to avoid a shutdown. RSM Chief Economist Bruesewitz pointed out that if a new government shutdown occurs, it could slow Q4 economic growth by 1.5%. Such an economic shock is enough to motivate decision-makers to work harder to reach an agreement.

Although some Congresses have yet to reach a funding deal before the January 30 deadline, the market has demonstrated through actions that the probability of avoiding a shutdown is significantly increasing.