If you asked most people, I suspect most would say that government shutdowns would be bad for the stock market. But the historical data reveals the opposite: Stocks tend to rise during serious government shutdowns in which hundreds of thousands of employees are furloughed for more than one trading day.
When did the stock market shut down?
The market closed for two days in 2012 after Hurricane Sandy, and shut down from Sept. 11 through Sept. 14, 2001, following the terrorist attack on New York City.
When does trading stop?
Trading begins at 9:30 a.m. Monday through Friday, except for nine holidays. Markets close at 1 p.m. on the day before three holidays, July Fourth, Thanksgiving and Christmas. The NYSE and Nasdaq have extended afternoon hours from 4 p.m. to 8 p.m.
What did the stock market close at Yesterday?
“I really didn’t like yesterday ... market really, really did unbelievable things in the last year and a half,” Acampora said. Check out: The Nasdaq Composite just logged its 66th correction since 1971. Here’s what history says happens next to the ...
How did the market finish Yesterday?
The bull market has continued this week - the Dow Jones Industrial Average set a new record high yesterday, closing out at 15,744, and the S&P 500 is just a point below an all-time high at 1,770.49.
Does the stock market go down with government shutdown?
In the 14 government shutdowns since 1980, stocks have posted “very small” returns leading up to and during government shutdowns, generating median losses of 0.1% on days the budget authority expires—which would happen Thursday if lawmakers don't strike a deal—and staying virtually flat throughout the shutdown periods, ...
Does government policy affect the stock market?
Stock prices fall at the announcements of policy changes, on average. The price fall is expected to be large if uncertainty about government policy is large, as well as if the policy change is preceded by a short or shallow downturn. Policy changes increase volatility, risk premia, and correlations among stocks.
Can the government control a stock market crash?
While the U.S. government doesn't directly intervene in the stock market (say, by inflating the prices of stocks when they fall too low), it does have power to peripherally affect financial markets.
Which shares are affected by government policy?
This drives the prospects of growth in various sectors and stocks. Government policies can impact any industry - telecom, energy, oil and gas, refinery, banking, transportation, organised retail, import/export scenario etc.
Does the government invest in the stock market?
Public interest has become widespread in having the federal government invest in private securities (such as stocks and bonds) as a way to increase the flow of budgetary resources to the government.
What are the side effects of government policies?
Government policy can influence interest rates, a rise in which increases the borrowing cost. Higher rates will lead to decreased consumer spending, but Lower interest rates attract investment as businesses increase production. Businesses can not thrive when there is a high level of inflation.
What happens during a government shutdown?
Honestly, not much. Most federal government offices effectively close their doors to everyone but the most essential employees. What services or employees are "essential" can depend on the timing of the shutdown, and the government department.
November 1995 shutdown
A bitter battle between opposite sides, led by Newt Gingrich and President Bill Clinton, ended with a short government shutdown from Nov. 14 to Nov. 19, 1995. In all, approximately 800,000 workers were furloughed during the period.
December 1995 shutdown
Over the holiday period spanning from Dec. 16, 1995, to Jan. 6, 1996, the government was shut down once again. In all, about 284,000 workers were furloughed, fewer than the 800,000 employees who were furloughed one month earlier.
October 2013 shutdown
After nearly 18 years of relative peace in Congress, the U.S. government was shut down for a brief period spanning from Oct. 1, 2013, to Oct. 16, 2013. As many as 850,000 federal employees were furloughed at the peak, while another 1.3 million were required to clock in without knowing when they might be paid for their work.
Stocks are inherently unpredictable
If you asked most people, I suspect most would say that government shutdowns would be bad for the stock market. But the historical data reveals the opposite: Stocks tend to rise during serious government shutdowns in which hundreds of thousands of employees are furloughed for more than one trading day.
Topline
With a potential government shutdown and debt limit showdown both looming in the days and weeks ahead, investors are growing concerned about how uncertainty in Washington could spill over into the market, and though stocks have only posted small returns during past shutdowns, experts agree the United States’ first debt default in history could be much worse—especially for government-exposed stocks..
Key Facts
In the 14 government shutdowns since 1980, stocks have posted “very small” returns leading up to and during government shutdowns, generating median losses of 0.1% on days the budget authority expires—which would happen Thursday if lawmakers don't strike a deal—and staying virtually flat throughout the shutdown periods, Goldman Sachs reported in a Tuesday note..
Tangent
In its Tuesday note, Goldman pointed out companies drawing at least 20% of their revenues from government spending are generally most vulnerable to a debt crisis-induced stock market decline.
Key Background
With a shutdown deadline less than 48 hours away, lawmakers are still in a bitter standoff over how exactly they’ll pass a measure to fund the government.
What To Watch For
On the Senate floor Wednesday morning, Majority Leader Chuck Schumer (D-N.Y.) said he would introduce a stand-alone continuing resolution on Wednesday to fund the government until December. "We can move this measure quickly and send it to the House so it can reach the President’s desk before funding expires," he said.
Further Reading
A Government Shutdown Is Just Days Away—Here's What Would Happen If Lawmakers Don't Strike A Deal (Forbes)
