On the heels of a government shutdown, the U.S. stock market opened a new month and new quarter with hardly a shrug, as investors appear confident that the first shutdown in 17 years will be relatively short lived. In fact, Wall Street rebounded Tuesday, with approximately 6 billion shares exchanged throughout the day. Shares across the board from Apple to WellPoint Inc. to Walgreen Co. saw gains despite political trepidation over the shutdown. Even gold, which has struggled in previous months, experienced notable rises.
But as 800,000 federal employees, national parks, and major services remain closed, investors are increasingly concerned about the how the shutdown will eventually affect the market. The reality, though, is that the shutdown itself will have little to no impact, as the real concern will be the upcoming debt limit. Though the government has raised the debt ceiling on 42 occasions since 1980, many are uncertain about how a deal could unfold in today’s hyper-partisan political age.
What Investors Need to Know About the Shutdown
Though it’s impossible to predict the future effects of the shutdown, the best guage is to look backwards at the 1995 shutdown under Bill Clinton. The impact then? It wasn’t meaningful. Even among consumers, those most likely to cut back on personal spending have already cut back, according to the latest findings, so the impact has again been minimal.
But while investors collectively shrugged at the government shutdown, polling reveals increased concerns as the debt limit approaches. The continued political gridlock and debt ceiling crisis have begun to create worries in the bond market. Approximately 4 in 10 investors say that they have made no portfolio changes, and 41 percent of investors say that they haven’t made any investment changes. Still, the majority of investors continue to monitor the situation closely.
Experts Suggest Investment Strategies Should Remain Relatively Unchanged
As investors see a limited impact from the shutdown, conventional wisdom suggests that political events shouldn’t affect how investors view or analyze the technology. In other words, while politics may affect the market, the volatility itself is nothing new, which implies that investors shouldn’t divest from the market simply because of uncertainty.
Rather, changes in strategy or allocation should continue to be based on economic and market factors, not political events. There have been political conflicts in the past and there will be more in the future. Despite these political turmoils, the reality is that investors who continue investing during the highs and lows of the market ultimately reap the greater long-term benefits of higher potential returns.
Investors Should Be Aware of Potential Data Delay
Still, the government shutdown will inevitably have an impact on the way that the market and economy perform. With various areas of the government shutdown or downsized, investors should expect economic reports to be delayed. Federal agencies that report on the economy and allow for scrutinized analysis are also affected by the shutdown, meaning that economic data and indicators may take longer than usual to be released.