Will A Government Shutdown Derail Stocks?

By Bryan Rich

January 16, 4:00 pm EST

Stocks reversed after a hot opening today.  With a quiet data week ahead, the focus is on the prospects of a government shutdown.

If this sounds familiar to you, it should.  Government debt is the, often played, go-to political football.

It was only last month that we were facing a similar threat.  But with some policy-making tailwinds on one side of the aisle, the fight was politically less palatable in December.  With that, Congress passed a temporary funding bill to kick the can to this month.

And just three months prior to that, in September, we had the same showdown, same result.  The “government shutdown” card was being played aggressively until the hurricanes rolled through. From that point, politicians had major political risk in trying to fight hurricane aid.  They kicked the can to December to approve that funding.

Now, the Democrats feel like they have some leverage, and their using the threat of a government shutdown to make gains on their policy agenda.  So, how concerned should we be about a government shutdown (which could come on Friday)? Would it derail stocks?

If you recall, there was a lot of fuss and draconian warnings about an impending government shutdown back in 2013.  The government was shutdown for 16 days.  Stocks went up about 2%.    Before that was 1995-1996 (stocks were flat), and 1990 (stocks were flat).

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