Why Are Stocks Moving Higher Amid Gov't Shutdown?

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Oct. 1 (Bloomberg) -- Stanley Crouch, CIO at Aegis Capital, and John Manley, chief equity strategist at Wells Fargo Funds, discuss the market reaction to the U.S. government shutdown with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

More than $2 billion.

Thank you for coming in.

Why did stocks move higher?

I think it was algo driven and they bounced in between the standard deviations on the volume.

Do you understand what that meant?

I think i know what happened.

I think number one italy was not bad as people thought in the last few weeks, since we focused on it, it seems to beginning' sir.

Number three, the last time we shutdown -- closer and closer.

Number three, the last time we shutdown the government it was not necessarily the kiss of death.

Why is the stock market connected to a government shutdown?

I think people fail to realize how important the fiscal injection is.

If you net out the deficit from gdp, you would have negative gdp.

So it is really an important component of economic activity.

Government spending makes the economy go around.

Of course.

You just had a guest who was the head of the union.

She has 130,000 members.

People can argue whether that transfer payment is as valid.

But they are still consumers that go out and buy cars, rent homes, go grocery shopping.

John manley, when does the shutdown affected the economy?

I think it is going to affect it immediately.

It's going to be perceptible by people directly affected but it will show up in numbers within a week or two.

I also think when it starts is when it ends.

Politicians do not like offending a lot of people they don't have to.

It will be forced to do something.

So as stanley crouch starts to get calls from his members, will that influence house republicans?

Depends on which republicans.

The established republicans would have voted not to have this happen.

This is a stand being made by folks who believe in their balance they are doing the right thing.

And they may be, i am not sure the president is as misaligned as we think on this.

He may be trying to force some changes.

If we are not going to revamp everything, we have a longer- term problem.

What do you mean?

In terms of spending, entitlement, and revenue.

We have to do it all.

We have a function on debt and we could see, you can go on and look at it, look at the debt increase we have had.

That has a coupon attached to it.

You can't catch up.

There is a tipping point it will be irreparable.

I do not think this president wants to go from saving the world and then dropping back to a bottom or worse by the end of the second term.

That is my feeling.

John manley, that sounds ambitious and realistic, but if we can't even pass a continuing resolution to keep the government open, what is the likelihood we will solve entitlement and the deficit?

I don't know.

When we go at each other, it tends to clear the air.

So i suspect he is right.

They will make progress.

We all know they are going to have to report back to the people at home, including the president.

I think at the end of the day, something has to be reached, i don't think they can just walk away and say the other side got everything.

You know that ben bernanke is going to be speaking on friday.

That is the schedule.

Will he have anything to say about the shutdown?

I think he had something to say when he did not taper.

The fed has prided himself -- itself on its open communication platform yet they lead the markets to believe, because they could have countermanded the perception they were going to taper.

He realized we were probably going to have this impasse and did not wanted that to affect all of the work of the fed believes they have done through qe.

The efficacy of key we is far less -- qde is far less effective than the perception of qe.

Sentiment versus reality of quantitative easing.

John manley, i was wrong.

Ben bernanke is going to be speaking tomorrow in st.

Louis.

My thanks to my producer for correcting me.

Do you think is going to say anything that matters?

To the markets perhaps.

They're going to be listening.

I am sure he is going to -- the debt ceiling.

The last thing the fed wants is something that disrupts the flow of funds.

That is not going to make life easier for them.

It is very difficult to say you have to solve it this way.

I am not sure the direction is going to be given by the fed.

I don't think he is going to give specific advice.

There is a lot of money still coming into market.

There is a lot of skepticism.

Valuations are reasonably moderate.

It is not cheap but they are modest.

I think a lot of people are going to find themselves pushing toward stocks.

Stocks move higher?

I think they are going to be challenged.

We've net, we have been in a topping mode.

We have not gone anywhere net from may.

We had a little volatility in between but not the kind of amplitude you would normally see.

We are in this controlled pattern but it is starting to look more dome-y and is sing

This text has been automatically generated. It may not be 100% accurate.

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