History shows that stocks have the tendency to gain during
and after a government shutdown, but what about other investment
categories like gold (NYSERCA:IAU) and U.S. Treasuries
Scott Minerd, the Global Chief Investment Officer at Guggenheim
"There have been 17 U.S. 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 U.S. 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, andTreasury
yields fall by an average of 22 basis points over the following
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
During the last two government shutdowns in 1995-96, neither lasted
longer than a month.
Related Economic News
The Bureau of Labor Statistics did not issue the September
unemployment report (due today) because of the U.S. government
shutdown. The headline rate for nationwide unemployment for August
was 7.3%, while the more complete U-6 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 2011.
Private sector U.S 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.
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