Government Shutdown & Market Impact
These days, more often than not the news shows us something that feels unsettling – and right now it’s talk of the government shutdown that has taken center stage. Amid the clamor, it’s natural to wonder how this might affect investments.
Here’s some perspective I’ve found useful: Since 1981 there have been 11 government shutdowns. Most ended in less than five days. Of the four that stretched longer than that, the U.S. stock market ended flat in one, and actually ended higher in the other three.
In other words, while shutdowns are frustrating (if not infuriating), history suggests they are not a reason for long-term investors to panic.
Two charts to illustrate:
A few points worth keeping in mind:
- Markets have a strong track record of pushing through periods of uncertainty.
- Shutdowns are temporary events – not structural changes to the economy or markets.
- Our diversified investment strategy is built for the long term and does not depend on predicting headlines.
While Trump Republicans have forced the current standoff and are trying desperately to capitalize on it, our focus here is not partisan. It’s a simple look at the evidence as a reminder of what history may have to teach vis-à-vis investing... history’s message: Staying disciplined is a better strategy than reacting to short-term “noise” – especially when that noise comes in the form of politically-inspired headlines.
As one analyst summarized:
“While shutdowns tend to echo in politics, the noise quickly dissipates in the markets.” – Jason Blackwell, CFA
If you would like more insights on how markets have reacted in past shutdowns, we encourage watching this short video by our Focus Partners colleague Jason Blackwell.
