September 22, 2023
The specter of a U.S. federal government shutdown continues to loom this week as Congress has just days to agree on a budget before the October 1 deadline. A temporary measure on Sunday was released, which could push the deadline out another month, with the hopes of a final solution coming in the interim. However, that proposal has encountered pushback and has yet to be voted on. The bad news is it looks like the government is headed for another shutdown; the good news is the stock market has seen this before.
The government has had 20 shutdowns since 1976. The average length of those shutdowns was eight days. The most recent, which started in December 2018, and extended into 2019, was the longest in history and lasted 34 days. The chart below, shows the duration of each shutdown since 1976.
While history has shown the stock market can weather such events, it remains to be determined if other secondary impacts will be felt (barring the event that a compromise is made before the deadline). An extended shutdown would put economic data aggregation in jeopardy as many government entities responsible for collection and dissemination would be dormant. This would put the data dependent Federal Reserve in an unenviable position as the market awaits its signals. While LPL Research maintains a neutral weight to equities, LPL views any outsized declines as an opportunity to buy-the-dip, based on the strength of historical patterns.
Our Covenant Wealth Strategies' Investment Team is closely monitoring a variety of data points to make wise and appropriate investment decisions. It is a natural response to want to posture defensively during times of increased volatility. It is important to not lose sight of your long-term goals.
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