Market Strength Outshines Shutdown Noise

October 2, 2025

The October 1 deadline has passed, and the U.S. government is now in a partial shut down. While political gridlock is never ideal, history suggests that shutdowns tend to be short-lived and have minimal sustained impact on the economy or the stock market. They are largely about political posturing and therefore don’t take long to get resolved. Simply put, delaying certain government services is not a winning political strategy for either party.

Investors have looked past budget disruptions throughout history and have focused on traditional fundamental drivers of the economy and stock market, such as corporate earnings, consumer spending, business investment, inflation, and interest rates. That said, sectors heavily reliant on government contracts — such as defense and life sciences — may experience some short-term volatility. An extended shutdown, which could delay key economic data releases, including the October 3 jobs report, could detract slightly from economic growth.

The government has had 20 shutdowns since 1976. The average length of those shutdowns was eight days. The longest, in 2018–2019, lasted 34 days. The chart below, shows the duration of each shutdown since 1976. It is worth noting that the S&P 500 has historically posted average gains of 1.2% and 2.9% in the one- and three-month periods following budget resolutions, underscoring the market’s resilience, though past performance does not guarantee future results. Even if investors ignore the government shutdown, a market pause may be in order given how far stocks have come since April — even as more tariffs are absorbed.

While we might see some ups and downs in the short-term, the bigger picture still looks positive. Rather than getting caught up in the political noise, we believe it’s important to focus on what truly drives the markets. Should a pullback happen, it may present an attractive entry point. Our team is closely following all market signals to make wise and appropriate investment choices.

If you have specific questions or would like to discuss your own investment strategy or financial planning needs, we welcome you to call us at 302.234.5655 or email us at contactus@covenantwealthstrategies.com to set up time to discuss further.

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