How the S&P 500 behaved after 10 previous government closings

While government paralysis has been approaching for a week, investors could monitor the impact of the dead end in Washington on their portfolios.

Until now, actions are doing very well. Even if the S&P 500 was down slightly on Tuesday, the index gained 0.80 % between October 1 and 6 – and even reached several new heights.

It turns out that the market gains during and after a government closure are not unusual.

“Historically, the closures themselves have rarely derailed the actions,” said Cathy Curtis, approved and founder financial planner and CEO of Curtis Financial Planning in Oakland, California. Curtis is also a member of the CNBC Financial Advisers Council.

The S&P 500 climbed 36 % during the year which followed the last closure of the government, which ended in early 2019, found Morningstar Direct. A hundred days after the 1982 closure, the index was up 19.7 %.

“The markets are turned to the future and tend to integrate future conditions, and not the current noise,” said Andrew Hiesinger, founder and CEO of ET Data, an information platform on the markets.

Post-stop gains are not universal. For example, 100 days after the closure of January 2018, the S&P index had dropped by 4.5 % and was still down 3.1 % after a year.

The stock market does not behave too much during the current closure, as investors are betting on lower inflation and possible rate reductions on the share of the federal reserve, said Hiesinger.

“The market has learned to ignore recurring political dramas that rarely modify long-term fundamentals,” he added.

This means that investors can also moderate their reactions to the titles, said Curtis.

“The best response to a stop is generally not to react at all,” she said. “Helping investments despite uncertainty has always rewarded those who remain patient.”

Performance data at the M&P 500 stops also show the advantages of investing in a diversified stock basket, for example through the funds negotiated on the stock exchange or common funds, rather than in an individual business.

“During the political dead end, a large exhibition often surpasses reactive trading,” said Hiesinger.