Budget impasses can disrupt certain government services, but they’ve historically had little lasting impact on stock prices.
Another deadline, another showdown
Once again, Congress is racing against the clock to negotiate a deal by September 30 to fund government services. Usually, the parties come together at the last second to avert a shutdown, passing a continuing resolution or a stopgap funding measure. But sometimes those talks spill past the deadline.
Since 1976, there have been 21 instances of a government shutdown. Twelve of these were resolved within a week. But the most recent shutdown lasted 35 days.
Markets can be volatile during these times, with stocks historically split evenly between gains and losses. However, losses tend to be modest and short-lived. On average, the S&P 500 has returned 0.1% during shutdowns, but in the 12 months following their end, the S&P 500 has gained 12.2%.
Don’t let budget drama derail your investment approach
Government shutdowns often create uncertainty and concern in financial markets. However, history suggests that investors shouldn’t let short-term budget disputes disrupt their long-term investment goals. Staying focused and resisting the urge to react impulsively can help maintain investment discipline even during periods of heightened uncertainty.
A note about risk: All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. All security transactions involve substantial risk.