Perspective on Government 'Shutdown' #18
While we would rather just ignore the ongoing shenanigans of our 535 ‘leaders’ in Washington, D.C., the non-stop media coverage this week will be impossible to get away from, so we wanted to offer one additional piece of perspective now that a budget compromise has not been reached (yet). Below and attached to this email is a summary of the 18 shutdowns that have occurred since 1970, showing the performance of the S&P 500 stock index before and after the shutdown periods.
Two key points should be taken from this graphic. First, all of the shutdowns have lasted less than a month and most have lasted one week or less. Once a shutdown goes into effect, it does not take very long for our representatives to start hearing from their constituents and for them to get their act together and get back to the bargaining table. Secondly, while a shutdown does tend to create short term volatility in the investment markets, within a month or two after it is over, the markets usually return to their normal drivers of economics, corporate earnings, employment, and other traditional components. And leading up to this shutdown, those drivers led the primary investment markets to solid returns so far this year and no indication yet of changing course.
Our message today is to do your best to ignore the hysteria this week and for however long this situation lasts.