What sort of merciful god allows a government shutdown to close
national parks and keep assorted pundits' mouths open? The worst
part of our various manufactured crises is the endless parade of
camera-chasing know-it-alls -- few of whom have demonstrated an
ability to forecast snow in January -- to opine on the market
outcomes of shutdowns, closures, defaults, and other manifestations
of our hard-to-watch political system.
Let's ask ourselves a relatively simple question: Which industry
groups' total return streams changed significantly between the
October 1 start of the shutdown and the October 10 date of this
writing in comparison to the period between the September 18 FOMC
meeting and September 30? I will use an 83.33% confidence interval
here as that gives us 5-to-1 odds of a significant change.
The answer is that only 13 of the 144 industry groups in the
S&P Supercomposite changed, and here is the good part: Only one
of those groups, wireless services, saw a shift from positive to
negative average daily returns. This group includes
Crown Castle International
Telephone & Data Systems
). The other 12 groups all saw shifts from negative to either
positive or, in the case of hotels, to less negative average daily
returns after they shut the lights in Washington.
If federal spending is so important -- and it is -- then why did
only one group's returns shift lower when it was threatened? The
obvious answer is that the market in general saw through the
political posturing better than did the pundits. Call it the Alfred
E. Neuman School of investment management: What, me worry?
I should note that three of the groups involved were distillers and
vintners, packaged foods, and soft drinks. Americans: When the
going gets tough, we sit in front of the TV with beer and pretzels.
The Founding Fathers would not only be proud, but they would
probably join us on the sofa. Other groups on this list include
health care equipment and health care distributors; perhaps this
was in some sort of hope that the medical equipment tax in
Obamacare would be repealed.
There is a second and much larger list involved, and that is the 39
groups whose returns were unchanged at a similar confidence
interval. No sectoral themes are apparent in this list, which is
just as well. This list's large size is a tribute to inertia: Just
like people, industry groups' preferred course of action is no
action at all. For all of the bloviating about how we were in some
sort of end-of-days crisis, three times as many industry groups
were unchanged as were changed significantly.