The US government shut down after Congress was unable to reach a funding agreement. This is the 11th shutdown since 1981.1 During these shutdowns, many nonessential functions of the government cease. In most cases, the fiscal shortfall was resolved within a few days. However, four shutdowns lasted at least five days.
How did stocks fare during these prolonged episodes? The US market ended higher at the conclusion of three and was flat in the other.
So, while a shutdown may be a nuisance,2 history suggests it’s probably not cause for concern in your portfolio.
1. The appropriations process through which the federal government budget is allocated became stricter about shutting down government operations in the event of a funding gap after legal opinions issued in 1980 and 1981.
2. Especially for those with travel plans, since the impacted services may include the Transportation Security Administration (TSA).
Index Description: Fama/French Total US Market Research Index: Fama/French Total US Market Research Factor + One-Month US Treasury Bills. Source: Kenneth R. French—Data Library (dartmouth.edu).
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