U.S. Government Shutdowns & Implications for Equity Market Participation

Oct 3, 2023


The U.S. government avoided a shutdown on October 1, 2023, after Congress approved legislation to extend the deadline to pass all appropriation bills to November 17, 2023. Should Congress fail to fund the government for the next fiscal year by this deadline, a government shutdown may ensue. However, if history is any guide, a U.S. government shutdown should not be an excuse to avoid equity market participation, given that past government shutdowns suggest such an occurrence will not provide a lasting detriment to a diversified portfolio.

  • Since 1977, there have been 20 government shutdowns with an average length of 8 days.
  • Third-party research suggests that a potential shutdown is not likely to exceed a couple of weeks.
  • Given the long-term resiliency of the U.S. equity market, the S&P 500 Index has historically overlooked political gridlock.
  • The last government shutdown, which occurred for 34 days (starting in December 2018), saw the S&P 500 Index return over 10%.
  • Overall, returns during government shutdowns are largely neutral, with an average return of just 0.07%.
  • Not only does the equity market exhibit resilience during shutdowns, but it also tends to perform strongly after a resolution.
  • During the three-month period following each historical resolution, the S&P 500 Index has been positive 70% of the time, with an
    average return of 3.7%.



By  Investment Policy Committee

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