The 3-day old government shutdown ended this afternoon when the Senate overwhelmingly voted in favor of passing a stopgap bill to fund the government through February 8. After failing to secure the necessary votes on Friday due in large part to a stalemate over immigration issues, many Senators who previously opposed the bill agreed to vote in favor of it in exchange for assurances that the debate on immigration, as well as border security and other related issues, would resume in short order.
Major U.S. indexes appeared to react positively to the news, though investors had shown little concern last Friday as stocks rose despite reports of a steadily declining likelihood of the bill passing. Over the past 40 years, the government has shut down on 18 previous occasions, and these experiences have proven to be a non-event for the stock market as the S&P 500 Index has lost -0.6% on average during periods of closure. Focusing on more recent instances, the last three government shutdowns, which happened in 1995, 1996, and 2013, saw the S&P 500 gain +37.58%, +22.96%, and +32.39%, during those years, respectively.
However, as we move closer to spring, the need to extend the debt ceiling accelerates, and prolonged uncertainty could prove to weigh on investor sentiment. So what could this mean for the economy and markets? Per John Lynch, Chief Investment Strategist at LPL Financial, “Despite the threatening headlines, investors must keep in mind that government shutdowns, though high in drama, have historically had almost no effect on the economy or markets. And with strong fundamentals supporting further economic growth and business profitability, we would view any market pullbacks tied to the debt ceiling as potential buying opportunities for suitable investors.” As the next deadline quickly approaches and consensus will likely again be hard to achieve, look for additional insights and analysis from LPL Research.
Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.
Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
The economic forecasts set forth in the presentation may not develop as predicted.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit
Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor Member FINRA/SIPC
For Client Use – Tracking #1-690717 (Exp. 01/19)