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Are You A Seller or a Buyer on a Shut Down?


I’ve received a couple of emails today from people that are curious whether they should be buyers or sellers if the House/Senate/President can’t reach a compromise on a Continuing Resolution.

Fortunately, Forbes online had the above graphic which gives you a history of government shutdowns going back to 1976 and their impact on stock prices.

I honestly do not see any discernible pattern now nor when I reviewed similar data in preparation for last week’s blog post:

> the 70’s were mostly negative as that was the last secular bear market; and

> the 80’s and 90’s were mostly positive as that was the last secular bull market.

Since we are part of the current secular bear market that began with the 2000 NASDAQ crash, odds are that a government shut down would have negative implications on stock prices – but honestly, I think its a toss-up.

Will we actually have a shut down? Hard to know what’s going on in DC – I can’t imagine anyone wants one since there is ample blame to go around. But given the polarization in our capital at the moment, it could certainly happen.

One idea I saw floating around was that the House would approve a CR with the caveat that Congress and their Staff would not be exempt from it nor receive subsidies in excess of what the general public received. It would seem that this would be difficult to dispute since those subsidies for Congress and their Staffs are pretty unpopular with the general public.

We will just have to watch and see what happens. However, given the data in the table above, it isn’t time to panic if history is a guide.

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