The U.S. federal government officially entered a shutdown at 12:01 a.m. on Wednesday, Oct. 1, after Congress failed to reach an agreement on a spending plan.
While the headline news introduces a new layer of uncertainty for markets, historical data suggests that these events are often short-lived and have a limited long-term impact on equities.
For investors, looking past the political turbulence is often key. Here are the facts you need to know:
Shutdowns Are Typically Brief And Markets Are Resilient
- History shows that government shutdowns are generally not a reason to panic-sell. The U.S. government has shut down 20 times since 1976, with the average shutdown lasting only eight days.
- While some market volatility can occur, investors have generally looked past these budget-related disruptions. Market performance following a shutdown has been strong.
- The S&P 500 has historically posted average returns of 1.2% one month and 2.9% three months after a budget is passed.
- One year after a shutdown ends, the S&P 500 posts an average gain of +13% and has ended higher in 86% of cases, according to The Kobeissi Letter.