The S&P 500 (SPX) is trading lower after the government closed its doors at 12:01 a.m. Eastern Time on Wednesday as a result of funding extension disagreements between Democrats and Republicans. However, as scary as it might sound, history suggests that government shutdowns aren’t bad for the stock market.
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The average shutdown lasts for 8.2 days, according to data compiled by Carson Research. During that time, the S&P 500 has an average return of 0.3%. The returns after the government reopens are even better.
S&P 500 Tends to Post Solid Gains Once Shutdowns End
After the government reopens from a shutdown, the average 3-month return for the benchmark index sits at 2.6%, according to Edward Jones. The average 6-month return is even better at 7.5%.
“Shutdowns happen. They can take a tad off GDP, but it comes back quickly,” said Carson Research chief market strategist Ryan Detrick in an X post. “Historically, stocks take shutdowns in stride.”
A year later? The S&P 500 is higher by an average of 12.7%. The track record shows investors usually look through shutdowns with generous returns on the horizon.
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