ispyetf logo
Login | Free Newsletter Subscribe
History Shows That Government Shutdowns Don’t Affect Stocks
By, Simon Maierhofer
Monday September 30, 2013
'Government shutdown' is the buzzword of the week. Politicians use it as bargaining chip, the media loves to beat the subject to death and investors worry about what it may or may not do to their portfolio. Surprisingly, history says, ‘Don’t worry about it.’

Is the potential government shutdown a real threat to stocks or is it just a focal point that keeps investors (in particular the media) busy?

History suggests that stocks’ reaction to a shutdown is rather apathetic.

Since 1980, there have been eleven shutdowns with an average duration of 3.9 days.

The most recent one – 12/15/1995 – was the longest shutdown on record. It lasted 21 days. The other ten shutdowns between 1980 – 1995 lasted between one and five days.

The red lines on the S&P 500 (SNP: ^GSPC) chart below show all government shutdowns since 1980.

On average the S&P 500 (NYSEArca: SPY) gained 0.4% the week before the actual shutdown.

Surprisingly the S&P 500 (NYSEArca: VOO) gained 1.3% on average the week after a shutdown. 

The day after the shutdown saw an average loss of 0.2%.

One Month after the shutdown the S&P 500 (NYSEArca: IVV) was positive 9 out of 11 times with an average gain of 2.5%.

We should note that all government shutdowns (going back to 1976) occurred in the fourth quarter (five started on September 30).

While October can be scary for stocks, October also has a reputation as bear market killer. The fourth quarter in general is home to various bullish seasonal forces.


History and seasonality suggest that the impact of a possible government shutdown will be shallow and short-lived.

However, 2013 is a special year. Why? Since the 1970s the S&P 500 has adhered faithfully to a 13 and 7-year cycle. Both cycles meet in 2013 and promise to exert a strong influence on stocks.

A simple chart shows just how powerful those two cycles have been. The 7 and 13-year S&P 500 cycles (along with a telling chart) are discussed in detail here: S&P 500 Cycle Analysis

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE Newsletter.

footer top
footer bottom