With Washington aflutter over the rising likelihood for a government shutdown, Wall Street’s reaction amounted to little more than a shrug.
It’s not that investors don’t care. They’ve just got more pressing concerns, from slowing growth to the trade war and the Federal Reserve’s next moves on interest rates. And going by history, a work stoppage would do little to dent the market mood. In each of the previous five shutdowns going back 23 years, the S&P 500 Index has posted gains throughout, according to data compiled by LPL Financial.
“Although government shutdowns get a lot of press, stocks take them in stride,” said Ryan Detrick, a senior market strategist for LPL. “What is rare is the fact this would be the third shutdown this year. You have to go back to 1977 the last time we saw three shutdowns during the same year.”
The threat of a stoppage grew more ominous on Tuesday during a heated Oval Office meeting where President Donald Trump said he’d “shut down the government” if Congress withheld funding for a border wall. The brash statement contributed to a midday slide in the S&P 500. Stocks surged Wednesday by 1.7 percent amid signs the trade war with China was easing, even as the prospects for a shutdown increased.
“Markets are looking for companies that grow, and for better or worse, government is overhead in the model of how things work,” said Kim Forrest, a senior portfolio manager at Fort Pitt Capital Group. “It doesn’t necessarily factor all that much into whether or not we buy or sell.”
Investors can also point to two prior stoppages this year that did nothing to harm equities. January started with a partial shutdown, and in the weeks leading up to and following the closure, the S&P 500 gained more than 3.5 percent to cap the strongest month since 2016. Another shutdown, which last just one day, followed in February, and the gauge rose 1.5 percent.