Next week could gring the third gonverment shutdown of 2018, especially after the fireworks out of Washington yesterday. In a widely watched live TV debate, President Trump sparred with Senate Minority Leader Schumer and House Minority Leader Pelosi regarding funding for the proposed wall on the Mexican border and potentially shutting down the goverment.
What exactly does a shutdown mean for stocks? “Although shutdowns get a lot of media hype, the reality is that stocks tend to take them in stride. In fact, the S&P 500 has gained during each of the five previous shutdowns,” explained LPL Senior Market Strategist Ryan Detrick.
As the LPL Chart of the Day shows, shutdowns rarely push stocks significantly lower and have corresponded with a flat median return in the previous 20 shutdowns going back more than 40 years.
One would think shutdowns in December might be rare, but they’re actually fairly common. Three shutdowns in the same year, however, is not. Could this year be the first since 1977 with three separate shutdowns? If yesterday’s drama was any indication, the odds may have increased. However, next summer’s debt ceiling debate will be a more important issue when Treasury interest payments are at risk.
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