Government Shutdowns and Stock Market Returns

At 12:01 AM October 1st, the United States entered the 18th federal government shutdown in its history.  Thus far, the capital markets have greeted the shutdown with a collective shrug of the shoulders.  For better or worse, the capital markets and the American taxpayers are getting used to the political games being played in Washington.  We will admit that we were even a bit surprised to see the global stock markets post a gain on the first trading day in October. 

This got us wondering if history might be able to provide some perspective on the behavior of the stock market during the previous 17 government shutdowns.  Here's some highlights of what we found out.

The median length of a government shut down has been three days but the longest has been 21 days.  The average S&P 500 return during government shutdowns has been -0.1%.  The average S&P 500 return one month after a government shutdown has been 0.7% and with a positive return being posted almost two thirds of the time.  See below for more detail.

Denver Money Manager Quarterly Market Review

Click to catch up on the progress of the stock and bonds markets through the first nine months of 2013.

 Denver Money Manager Q3 2013 Market Review