Market Impact of Government Shutdowns by Daly Investment Management
Did you know the average return during shutdowns of about +3.6%, based on the last 10 government shutdowns. At Daly Investment Management we took some time and laid out some perspective and bullets around how we perceive government shutdowns and hope you find them insightful. If you enjoyed this sign up for our Daly Investment Management monthly investor recap meetings here.
Historical Market Performance During Shutdowns by Daly Investment:
Average market return over the last ~10 government shutdowns: approximately +3.6%.
Overall performance during shutdown periods: generally resilient, with positive average returns.
Duration context: shutdowns have varied in length and occurred across different business cycles, yet markets have not shown a consistent negative response.
Interpretation and Conclusions by Daly Investment:
Market implication: A government shutdown, on its own, is not a reliable indicator of negative market performance.
Historical pattern: Despite operational disruptions, shutdowns have not historically generated significant downward pressure on the stock market.
Caveat: While markets may hold up, shutdowns are undesirable from economic and social perspectives (e.g., furloughs, job disruptions).
Human and Operational Considerations:
Real-world impact: Furloughs and potential job losses occur during shutdowns.
Preferred outcome: Rapid resolution and restoration of full government operations.
Daly Investment Management Key Takeaways
Investment stance: Do not assume a government shutdown will automatically lead to adverse market returns.
Risk framing: Distinguish between market impact (historically muted or positive on average) and societal/economic disruptions (material for workers and services).
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