When President Trump promoted the possibility of a government shutdown during a debate with Democratic leaders Chuck Schumer and Nancy Pelosi, U.S. stocks fell.
At around 1:30 Tuesday December 11, the S&P 500 was at 2,635.52. Trump and the leaders of the Democrats in the Senate and the House of Representatives sparred about a government shutdown, and by 2:00, the S&P was at 2,624.41.
But the market usually takes a government closing with a grain of salt, and investors shouldn't shudder if the event does happen, according to a note from LPL Financial.
"Although shutdowns get a lot of media hype, the reality is that stocks tend to take them in stride," LPL Financial's Senior Market Strategist Ryan Detrick wrote in the note. While the average return for U.S. stocks during a shut-down in the past 42 years is negative, that down move is very muted.
In that time, the S&P 500 has lost 0.4% during periods which the government has shut down. There have been 20 shutdowns in that time span, and only nine of them have resulted in losses for the S&P during the events, which tend to last between three and twenty days. The worst performance the market has seen during such an event was in 1979, during President Jimmy Carter's term, when the shutdown lasted thirteen days, and the S&P shed 4.4%. The biggest gain was 3.1% over the five-day shutdown in 2013, during Barack Obama's presidency.
While Detrick isn't particularly concerned about the market during this year's potential third shut-down, he did note that "next summer's debt ceiling debate will be a more important issue when Treasury interest payments are at risk."
Tuesday, stocks wound up ending the day mixed, bouncing from the day's low, a down move that coincided with the contentious disagreement between Democratic leadership and the President. Wednesday, the Dow ended 0.64% higher and the S&P 500 ended 0.54% higher.