When Washington stalls, Wall Street watches. But does a government shutdown really derail the stock market? History says: not always.
What Happens During a Shutdown?
A government shutdown occurs when Congress fails to pass funding legislation. This halts non-essential federal operations, delays economic data (like CPI), and creates uncertainty.
Yet, the stock market often shrugs it off—especially if the shutdown is short-lived.
Historical Performance Snapshot
| Shutdown Year | Duration | S&P 500 Impact |
|---------------|----------|----------------|
| 1995 | 21 days | +0.1% |
| 2013 | 16 days | +3.1% |
| 2018–2019 | 35 days | +10.3% |
Investors often price in political risk early, and markets rebound once clarity returns.
Why Stocks Stay Resilient
- Fed Policy: Rate cuts or dovish signals often cushion market dips.
- Corporate Earnings: Strong Q4 results can offset macro fears.
- Investor Psychology: Long-term investors focus on fundamentals, not headlines.
What to Watch in 2025
- Delayed CPI data: Makes inflation harder to track—watch bond yields and Fed commentary.
- Tech stocks: Sensitive to regulatory uncertainty, but often bounce back.
- Defense & infrastructure: May face funding delays—monitor sector ETFs.