This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Government Shutdown a 'Plus for the Market'

BOSTON (TheStreet) -- Eric Singer, manager of the Congressional Effect Fund (CEFFX), laughs when he recalls the last government shutdowns in November 1995, during which he sat with a congressman on Capitol Hill.

During the very public battle between then-President Bill Clinton and Speaker of the House Newt Gingrich, expectations were that the stock market would be crushed as Americans lost confidence in the ability of the government. In addition, after threats Gingrich made about refusing to raise the debt ceiling for the Treasury Department, there were fears interest rates would head higher.

Singer says the major networks began scrambling to find video footage of a tangible change in function of the government to show U.S. viewers. The results, Singer says, were unintentionally hilarious.

"Finally, they showed a guy in a station wagon pulling up to Yosemite National Park in the middle of November so he could go camping," Singer says. "That became the video for why a government shutdown is so horrible. That was the only thing they could come up with."

The effects of government shutdowns more than a decade ago were minimal on the market. During the first five-day work stoppage, from Nov. 14 to 19, 1995, stocks rose slightly. The second, more prolonged shutdown from Dec. 16, 1995, through Jan. 6, 1996, resulted in miniscule gains for the three major market indices, a far cry from the investor calamity many pundits had expected.

Among the best-performing stocks during the first furlough of federal employees in 1995, Gilead Sciences (GILD) and Chesapeake Energy (CHK) rose more than 14%. Other energy companies like Southwestern Energy (SWN) and Baker Hughes (BHI) were also big winners. Tech firms like Microsoft (MSFT), JDS Uniphase (JDSU) and KLA-Tencor (KLAC) were the biggest decliners.

During the more prolonged government shutdown that lasted into early 1996, both Chesapeake and Gilead outperformed, along with Biogen Idec (BIIB) and Celgene (CELG). Tech stocks were once again weak, with Adobe Systems (ADBE) and Symantec (SYMC) each down more than 30%.

Singer, though, doesn't expect U.S. citizens to fret as much over a government shutdown as they did nearly two decades ago.

"The public expectation in 1995 was that the market was going to go crazy," Singer says. "Now, the idea that Congress is so dysfunctional that they can't cut their budget by more than 1% or 2%, when you contrast that to the re-pricing of the entire housing stock for the U.S., it's a complete disconnect."

Stock quotes in this article: CEFFX, GILD, CHK, MSFT, ADBE, JDSU, SYMC 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs