Recently government shutdowns have dominated the headlines, raising concerns about their impact on the market. Just last week, our government narrowly avoided another shutdown, extending funding until mid-November 2023

So, what exactly is a government shutdown? It happens when Congress and the President can’t agree on legislation to fund government operations and agencies, either at the start of a fiscal year or when previous measures lapse.

When this occurs, all non-essential services must shut down, meaning that some employees of the government may go unpaid, certain government programs may go unfunded, and other government actions may go uncomplete.

Since 1990, we’ve experienced 6 government shutdowns, ranging from as short as 3 days to as long as 34 days in 2019.

However, despite the political turmoil, and the media’s ability to always jump on an opportunity to stir up fear, the market has been resilient. Data from Bespoke Research shows that in the month leading up to a shutdown, the market has returned approximately 1.5%. During the shutdown? A return of 1.43%. And in the month following the reopening? 2.91%.

When we look at the time from one month before to one month after a shutdown, the market has actually increased by about 5.5%. And the market has been positive in 5 out of the 6 shutdowns since 1990.

So, while government shutdowns are certainly newsworthy, history suggests that the market has its own way of successfully navigating through these events.

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