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Government Shutdown-How it Affects the Stock Market

Obviously, the big news (besides Obamacare) that everyone has been reading, viewing or talking about is the US government shutdown, the first in 17 years — dating back to January 1996. The government did in fact shutdown on October 1st, and with this, many have questions about what’s open and closed, what payments are honored, and how the stock market has fared during past shutdowns. So today we thought we would offer a little fodder for your consumption on the topic — some that we generated, and some from other sources that we found insightful. First off, for those interested, we came across an article from USA Today that answered 66 questions on the topic. To access that article, click here.

Regarding the stock market’s behavior, see below: this image shows the market action for the S&P 500 Index [SPX] during the last US government shutdown that lasted for 21 days, from December 16th, 1995 to January 5th, 1996. Given that December 16th was a Saturday, below we show you the market performance from December 15th’s close to the close on January 5th. When it was all said and done, over those 21 days the market was basically flat, gaining +0.1%; granted, during those 21 days we started off with a sell-off only to rally back up towards the end of the shutdown period.  As you can see, this shows all the past government shutdowns, how long they lasted, and how the market performed before, during and after the shutdown. Generally speaking, as you can see there has been no major impact or trend regarding the market during these periods of shutdown.

From Dorsey Wright and Associates, www.dorseywright.com

10.2.13 gov shutdown



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