Investors nervous about government shutdown, default fears, poll finds

Nearly three-quarters of investors in a new survey say their confidence in the economy has been shaken by the government shutdown and threat of default.

Most people have not made adjustments to their portfolios as a result of the political impasse in Washington. But the survey suggests a cautiousness among investors that could weigh on the economy and securities markets if the stalemate is not resolved quickly.

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One in four investors think it is very likely the government will default on its debt, according to the poll by online brokerage TD Ameritrade. Another 44% say it’s somewhat likely.

Many experts fear a government default could be economically catastrophic, with severe ripple effects worldwide.

In the poll, 72% of respondents said the political showdown has diminished their confidence in the economy.

“Some investors likely aren’t adding positions or taking on new risk yet until there is a clear picture as to how the shutdown and debt-ceiling deadline will settle,” said JJ Kinahan, chief strategist at TD Ameritrade. “With about 1 million people furloughed from their government jobs there is concern that this could have an impact on retail sales, housing and durable goods.”

The stock market has weakened in the last three weeks. The Standard & Poor’s 500 index is down a bit more than 4% since its Sept. 18 peak.

But many analysts say investors are locking in profits toward the end of a strong years for stocks, and say the market could rally after the government showdown ends.

The bond market also has been rattled by the government morass.

Nearly four in 10 people – 37% – say they have not made portfolio changes because they expect a speedy end to the stalemate, the poll found.

A bit more than that – 41% – say they have not made investment changes, but might do so if the standstill continues.

One in 10 people say they’ve moved some money to cash temporarily. Another 12% say they hope a shutdown-related drop in the markets provides investment opportunities.

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Follow Walter Hamilton on Twitter @LATwalter