This Day On The Street
Continue to site
ADVERTISEMENT
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

Jim Cramer: This Shutdown Would Be Different

Editor's Note: This article was originally published at 7:20 a.m. on Real Money on Sept. 30. To see Jim Cramer's latest commentary as it's published, sign up for a free trial of Real Money.

NEW YORK ( Real Money) -- Not all government shutdowns are created equal. If you go back to the 1995-1996 shutdown, you see a rather remarkable development: It had almost no impact on the stock market whatsoever.

Remember, there were two shutdowns back then -- one that spanned the time frame of Nov. 14 to Nov. 19, and one that went from Dec. 15 to Jan. 6.

During the first shutdown, the Dow actually gained 2%. It then proceeded to rally 3% between the shutdowns. Then it was unchanged during the second shutdown.

Following that, it embarked on a remarkable 40% run over the next year.

So, you could argue that the government shutdown actually had a positive impact on the stock market. Looking back, you could certainly draw that conclusion.

But it wasn't like this back then. We had a lot of confusion in Washington, but we really didn't bother to think much about it. We were very earnings-centric back then and totally separated the two. What went on in Washington was a total sideshow.

Now, on the 10-year U.S. Treasury, interest rates did go from 7.78% in January of 1995 to 5.65% on January of 1996, which is a significant and positive move. The Dow jumped about 30% in the same period. One could argue that rates went down because Washington grew disciplined in spending and therefore the showdown had a positive impact on the budget, which resulted in lower rates.

But rates then went back to 6.58% a year later, so even I am suspicious of that linkage.

I know this sounds naive in retrospect, but we really didn't think back then the way we do now. We were embarrassed by our government for certain. We knew that we looked bad to the rest of the world. But it didn't change the economic landscape all that much. We were in the midst of an economic expansion and we were riding the wave of new technologies and jobs were fairly plentiful, with the unemployment rate having fallen from 5.6% to 5.4% from 1995 through 1996.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free

Markets

Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs