President Trump is set to meet with Democratic and Republican congressional leaders in the Oval Office on Monday in a last-minute attempt to avoid a government shutdown on October 1. Despite the impending risk, the market is rising today.
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That could be for good reason, as a government shutdown may not be as destructive as it sounds. During the last government shutdown, which began on December 21, 2018, and lasted for a record-breaking 35 days, the S&P 500 (SPX) rose by a staggering 10%, according to Edward Jones.
S&P 500 Usually Holds Steady amid Government Shutdowns
In fact, the benchmark index has averaged a return of 0% during government shutdowns dating back to 1976. The returns three months and six months after the event are positive the majority of the time, averaging 2.6% and 7.5%, respectively.
“But as history has shown, government shutdowns have had little lasting impact on equity performance,” said Edward Jones.
At the same time, a shutdown could delay economic reports, such as the Consumer Price Index (CPI) and retail sales, says Barclays. The economy has historically lost about 0.1% of quarterly gross domestic product (GDP) growth for each week that the government is shuttered, although these losses are usually recovered upon reopening.
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