Well, it’s happened again—the U.S. government has shut down for the 20th time since the mid-1970s. As we've seen during most of these events, the markets have largely shrugged it off. According to data from the Carson Group, the average government shutdown has lasted about four days and historically, markets have shown resilience. On average, returns during a shutdown were +0.1%, and in 86% of cases, the market was higher 12 months later.
While this is reassuring data for investors, the ultimate market impact will depend on how long the shutdown lasts, as well as broader economic and earnings trends. Each week the government remains closed is estimated to shave about 0.1 percentage points off quarterly GDP growth.
For federal workers, pay is paused during the shutdown but retroactively paid once it ends. Importantly, Social Security and Medicare payments continue uninterrupted.
In my view, the biggest uncertainty this creates for the markets is the lack of critical economic data. We didn’t receive jobless claims today, and we won’t get the non-farm payrolls report tomorrow. This lack of visibility makes the Fed’s job even harder as they try to assess economic conditions.
I’ll be closely watching the data that is still being released—especially labor market indicators, given the recent slowdown in hiring. ADP employment numbers declined for the second consecutive month, and we'll continue to monitor Conference Board data for further insight.
As for the duration of the shutdown or potential actions from the Oval Office—those remain unknown. Despite this added uncertainty, the S&P 500 is sitting at all-time highs. Could this finally be the catalyst for the pullback I’ve been anticipating? I still believe there’s a greater likelihood of a 7–10% move to the downside than continued upside from here.
📺 Join Us Live on Facebook – Every Friday
Catch us live every Friday as we break down the week’s market moves and preview what’s ahead—with real-time insights and analysis.
Disclaimer: The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts may not develop as predicted.