Before going into the convoluted politics of this coming week and the efforts to avoid a government shutdown, I wanted to share a study that the Fundstrat’s data science team put together looking at the impact on markets of past government shutdowns. The bottom line is that while shutdowns create headline risk, and leave foreign governments perplexed over US policy making, the shutdowns have little impact on markets.
Here are the statistics of all US government shutdown.
- We calculated the S&P 500 performances before and after a government shutdown.
- For each government shutdown, we also categorized it as "initial" or "follow-up". "Initial" means that government shutdown was the "first" shutdown during that fiscal year.
- We also included the government control (President/Senate Majority/House Majority) in the table.
And below is a quick summary based on the data above.
While past market reaction would indicate that a government shutdown would have limited market impact, a shutdown does create headline risk and raises issues that range from plans to visit a National Park that may be closed to the concern Fed Chair Powell raised last week that the FOMC may not have all the data they want to make the next rate decision on November 1.After ...