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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Why Investors Shouldn't Panic if the Government Shuts Down

NEW YORK (TheStreet) -- The latest manifestation of dysfunction in Washington is the threat of a government shutdown because of the huge ideological divide between the Republican-led House of Representatives and the Democrat-led U.S. Senate.

The current shenanigans likely will come down to two realistic outcomes: the GOP will give in on the Affordable Car Act more commonly known as Obamacare, keeping it mostly intact, or the government will shut down for some period of time. A third unrealistic option is Republicans successfully defund Obamacare.

The outcome more concerning to markets is a shutdown. Regardless of what you think about Obamacare (I think the economics of it are lousy), it passed several years ago and, although it is moving along slower than the President would like, the attempt to defund it at this point amounts to putting the toothpaste back in the tube.

But how scared of a shutdown should investors actually be? Is this really a doomsday scenario? Many pundits are comparing current events to the brief shutdown that occurred in late 1995 and into early 1996. For all of 1995 the S&P 500 was up 35% although it did endure a 2.5% dip, not even a correction, in early January of 1996 before going on to add another 30% in that year.

The point is not that a shutdown would be bullish for domestic equities, just that it may not be important as people think. My Street.com colleague and former boss Ken Fisher has referred to these situations as big bad scary events, and often they turn out to mean nothing and are soon forgotten. Market history is full of these examples.

Part of the buildup of anxiety is the belief that this time is different. My favorite example of this comes from the summer of 2002 when, starting in August of that year, company CEOs were going to have to sign their names to their companies' earnings. This was still in the wake of Enron and Worldcom and investors were terrified of the consequence believing that CEOs would not sign causing stocks to spiral.

The reason this is my favorite example is because I have yet to bring this up in conversation with a client or prospect who remembers this happening.

1 of 2

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.
Submit an article to us!
DOW 16,493.37 -69.93 -0.42%
S&P 500 1,925.15 -5.52 -0.29%
NASDAQ 4,352.6390 -17.1340 -0.39%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

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