Well, it happened again. The U.S. government went into “shutdown” this week after Congress couldn’t agree on a stopgap funding bill. We’ve seen this before, and while it makes for plenty of high drama in Washington, for the stock market it tends to be more of a speed bump than a roadblock.
As this week’s chart shows, since 1976 the government has shut down 21 times, lasting anywhere from 1 to 35 days, with the average running about 9 days. Markets usually dip during the uncertainty, but history shows they recover quickly. On average, the S&P 500 gains about 0.5% in the first month after a shutdown ends and about 1.5% after three months.
The hit to the economy is also typically small—around 0.1% to 0.2% off GDP growth per week—and most of that is recouped once things get back to normal. That said, shutdowns still add to uncertainty. They can rattle confidence, delay government data releases, and even affect hiring plans. So it’s not nothing.
But the bottom line for investors is this: the market has a history of looking past the noise in Washington and quickly returning to the business of pricing in future corporate cash flows.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.
The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S.