One thing that stock investors hate is uncertainty.
Many investors have wondered whether the U.S. government shutdown might snap the momentum of the 2018 stock rally - even as the U.S. Senate voted overwhelmingly on Monday to temporarily end the three-day-old partial closure of federal offices. Both parties now have agreed to fund the government for several more weeks, a tenuous deal that could lead to yet another shutdown if broader issues aren't resolved.
Should investors worry that this may kill the bull market? Probably not, according to Barron's.
'Investors Can Sleep Soundly'
One big reason is many stock investors are shutdown-hardened veterans. They have been through this all before. The 18 previous shutdowns since 1977 have had "very little discernible impact on the economic data," as Michael Feroli, an economist at JPMorgan, told Barron's. Moreover, the S&P 500 Index (SPX) has posted an average gain of 14.24% in those years, per James Brilliant, the co-chief investment officer of Austin, Texas-based Century Management Investment Advisors, in remarks to Barron's.
Indeed, in the seven prior years in which shutdowns required furloughs of federal employees, the average gain was even higher, at 15.56%, he added. Brilliant's advice, as quoted by Barron's: "the history of government shutdowns suggests investors can sleep soundly in the upcoming weeks."
Reasons For Calm
The main reason for calm among investors, as well as among most of the general public, is that federal government shutdowns historically have had limited impact on most citizens' lives, per Barron's. Interest continues to be paid on U.S. government debt and participants in Social Security and Medicare still receive their benefits. Essential protective services such as the military and federal law enforcement will remain in operation. Even furloughed federal employees in "non-essential" positions have little to worry about. After past shutdowns were resolved, they got back pay for their time off the job, Barron's adds.
Also, nutrition programs such as food stamps (SNAP) and the program for women and children (WIC) will continue, The New York Times reports. Additionally, per the NYT, air traffic control, the Transportation Security Administration (TSA) and U.S. Customs should continue to function at close to full staffing. The U.S. Postal Service will continue to deliver the mail. However, parks and historic sites managed by the National Parks Service, as well as the Smithsonian and other federally-operated museums, may be subject to closures or reduced services if the shutdown drags on. (For more, see also: A Survivor's Guide for a U.S. Government Shutdown.)
Delayed Data and Tax Refunds
An inconvenience for investors, according to Barron's, may be that releases of economic data collected by the federal government may be delayed. For example, they note, GDP figures for the fourth quarter of 2017 are supposed to be published on Friday, but this date may slip as a result of the budget standoff.
More federal employees than usual may be exempted from furloughs at the Internal Revenue Service (IRS) since the tax filing season is underway, per the NYT. However, this means that tax refunds may be delayed.