If Congress doesn't pass spending bills, parts of the government will shut down on March 1, with a complete shutdown on March 8.
Many past shutdowns (but not all) led to market volatility, which tended to resolve quickly with minimal to no impact.
Don’t let any short-term market volatility from a government shutdown impact your long-term investing plan.
Will the US government shut down this time? Congress pushed back the previous funding deadlines with a temporary spending bill in January. Without a new budget or another stopgap measure, a partial shutdown may begin March 1 followed by a full shutdown beginning March 8. Long periods of policy uncertainty generally raise market volatility. But past shutdowns have tended to resolve quickly with little market impact. That’s why it makes sense to stick to a long-term investment plan. Here are three things for investors to remember about government shutdowns.
There have been 21 government shutdowns in US history according to the US Treasury. They’ve been resolved, on average, within eight days. Five only lasted a day. The longest lasted 34 days.1
Market volatility often results from policy uncertainty. While there are examples of heightened volatility, for the most part, it’s been generally benign during past government shutdowns.
Source: Bloomberg L.P., 12/31/22. The Dow Jones Industrial Average is a price-weighted index of the 30 largest, most widely held stocks traded on the New York Stock Exchange. Volatility is measured by the standard deviation of price moves on returns of the index. Standard deviation measures a range of total returns for a portfolio or index compared to the mean. An investment cannot be made into an index. Past performance does not guarantee future results.
While the S&P 500 Index, on average, churned in the days leading up to and during government shutdowns, it advanced in the aftermath.2 The Index also posted positive returns during 12 of the 21 government shutdowns. The average return during the shutdowns is 0.1%.3 (Remember, shutdowns have been resolved, on average, within eight days.) Plus, despite experiencing 21 government shutdowns along the way, a $100,000 investment in the S&P 500 Index in 1957 would be worth $8.3 million today.4
While unnerving, concerns about shutdowns shouldn’t change investors’ long-term investment plans. This wouldn't be the first government shutdown, and it likely wouldn't be the last. Ultimately, I’d expect the spending bills to pass without incident. As Winston Churchill may have said, “Americans always do the right thing, but only after exhausting all other options.”
Source: US Treasury, 8/31/23
Source: Bloomberg L.P., 8/31/2023. An investment cannot be made into an index. Past performance does not guarantee future results.
Source: Bloomberg, L.P. 12/31/22. An investment cannot be made into an index. Past performance does not guarantee future results.
Sources: Bloomberg L.P. and US Treasury, 12/31/22. The S&P 500 Index is a market-capitalization-weighted index of the 500 largest domestic US stocks. An investment cannot be made into an index. Past performance does not guarantee future results.
Midyear Investment Outlook 2024: Looking forward to rate cuts
Invesco's midyear outlook looks at the path of inflation and how global central bankers are balancing risks as they begin to cut interest rates.
Reversals of fortune emerge in elections and economies
France and the United Kingdom see a change in political direction in recent elections. What could that mean for investors?
Is the US national debt a risk to investments?
The national debt has risen a lot in recent years but may not be the investment risk or pending disaster that some investors may fear.
Get the latest information and insights from our portfolio managers, market strategists, and investment experts.
Important Information
NA3409538
Image: Douglas Rissing / Getty
Past performance is not a guarantee of future results.
Indexes are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment.
Past performance does not guarantee future results.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
All investing involves risk, including the risk of loss.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.
The opinions referenced above are those of the author as of September 18, 2023. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.
This link takes you to a site not affiliated with Invesco. The site is for informational purposes only. Invesco does not guarantee nor take any responsibility for any of the content.
