Market resilience during DC shutdown

• Historical data shows that the S&P 500 tends to rise following the resolution.  

• Investors should remain calm and resist the urge to allow political turbulence to drive their financial decisions. 

  
  

With the government shutdown hitting the one-week mark, investors are keeping a close eye on whether the stalemate in Washington is beginning to impact their portfolios.

For reference; the US government has shut down 20 times since 1976, typically for short periods, with the average length being about eight days. However, the longest shutdown took place in 2018 during Donald Trump's first term. That shutdown was among the longest and was also an outlier in terms of the market moves during that time. 

So far, markets have held up. The S&P 500 dipped slightly on Tuesday, but from Oct. 1 to Oct. 6 the index gained and even set several new highs over that stretch.

Historically, the S&P 500 has shown remarkable stability during government shutdowns, typically posting returns close to zero with occasional exceptions. Markets have frequently gained ground both during and after these political standoffs. 

After the shutdown ended in early 2019, the S&P 500 climbed approximately 36% over the following year. Similarly, the index advanced roughly 19.7% in the hundred days following the 1982 shutdown.

That said, outcomes vary. The January 2018 shutdown proved less favorable, with the S&P 500 declining about 4.5% after 100 days and remaining down approximately 3.1% a year later. 

While shutdowns can create short-term noise, market outcomes have varied, and broad selloffs aren’t a given.