History shows that stocks have the tendency to gain during and
after a government shutdown, but what about other investment
categories like gold (NYSEARCA:IAU) and US Treasuries
Scott Minerd, the Global Chief Investment Officer at Guggenheim
There have been 17 US federal government shutdowns since 1976.
Excluding drastic moves in commodity prices and bond yields in the
late 1970s, analysis of eight occasions during the past 30 years
reveals that US equities and the dollar tend to decline during
shutdown periods, while gold and commodities tend to perform well.
Shutdown periods do not appear to have a significant effect on
10-year Treasury yields. Historically, when a shutdown ends, market
performance reverses quickly, and Treasury yields fall by an
average of 22 basis points over the following 10 days.
What will be the economic ramifications of the latest federal
closure be? A one-week shutdown will reduce annualized GDP growth
by 0.25%, according to consensus expectations. And the longer the
shutdown continues, the greater the potential financial damage to
the economy and consumer-focused industry sectors (NYSEARCA:XLY).
During the last two government shutdowns in 1995-1996, neither
lasted longer than a month.
Related Economic News
The Bureau of Labor Statistics did not issue the September
unemployment report on Friday because of the US government
shutdown. The headline rate for nationwide unemployment for August
was 7.3%, while the more complete U6 number was 13.7%.
The ISM manufacturing index (NYSEARCA:XLI) showed a faster pace of
growth in September, rising to 56.2, the highest level since spring
Private sector US employment grew by 166,000 in September,
according to ADP private payroll data, while the August numbers
were revised down to 159,000.
Pending home sales (NYSEARCA:XHB) declined for a third consecutive
month by 1.6% in August. Three straight declines have not happened
since the end of 2007.
Editor's note: This story by Ron DeLegge originally appeared on
To read more from ETFguide, see:
Stock Market Volatility Wakes Up, More Ahead?
Is the Great Gold Crash Over?
Is a Government Closure Bad for Stocks?