We are getting close to the decision point on whether large parts of the government will shut down again. Much of our discussion on the first shutdown still applies—the direct economic damage will be real but limited. As we look seriously at a repeat, though, we need to spend some time thinking about the indirect damage. If shutdowns become a regular feature of government, then the effect will be linear but could also rise substantially.

Although the government shutdown has now ended, several economic reports from previous weeks have not yet been released. It is still undetermined when they will be made available, although the releases have started. As such, the week ahead will be busy, with the regularly scheduled reports joined by some catch-up data.

Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. So, what do these risks look like for February? Let’s take a closer look at the numbers.

As far as we know, the economic news remained solid if somewhat mixed last month. The caveat here is that the government shutdown delayed some reports. The core data we look at, however, is available.

Now that the dust has settled a bit, and we have some (but not all, due to the shutdown) of the year-end data, let’s take a look back at 2018. In many respects, it was a better year than it seemed.

After a terrible fourth quarter in the financial markets, we had a sizable bounce in January. Markets were up significantly, both here in the U.S. and around the world, and sentiment seemed to change markedly from pessimism to a new optimism. The question going forward is whether things have really changed that much.

Last week was a busy one on the economic front, given the planned reports plus some of the catch-up reports from the government shutdown. Although the shutdown is now over, several economic reports from previous weeks have not yet been released. It is still undetermined when they will be available, although some releases have started.

January was a great month for the financial markets. Despite the government shutdown, signs of an economic slowdown, and dropping consumer and business confidence, U.S. and international markets were up. Plus, job and wage growth were strong, and companies made more money than expected. With the fundamentals solid, even the Fed hit pause on interest rate increases.

Well, as expected, the Fed did not raise rates yesterday. Further, it came out with what was perceived as a much more dovish statement than anticipated, essentially declaring a pause in rate increases. In response, markets cheered. Beyond that, the Fed issued a deliberately obscure piece on balance sheet normalization that, without making any commitments, stated that the Fed now expects to maintain an “ample supply of reserves.” Again, markets cheered.

With the brutally cold weather locking down large parts of the country, the hope today is that the Fed will heat up the markets by both holding rates steady (as expected) and dialing back the liquidation of its balance sheet. Personally, I think investors should be careful what they wish for. If the Fed really does slow the quantitative tightening process, in conjunction with keeping rates steady, it could be a sign of an even colder economy ahead.