September 28, 2023 - We would like to take this opportunity to briefly share thoughts regarding a potential government shutdown on October 1. What it means: If the federal government cannot come to a budget agreement this week, or a stopgap spending bill introduced by the Senate does not pass, all government action deemed non-essential will stop and millions of federal employees will be furloughed. It is important to note that while this will be disruptive to certain services, the U.S. Postal Service and offices of Medicare and Social Security will still operate.
It is possible that recent market weakness has been anticipating a shutdown like it did in 2018 and 2013, the last two government shutdowns. The one at the end of 2018 lasted 35 days and the previous one in 2013 lasted 16 days. As we noted in May when discussing the debt ceiling impasse, the last two government shutdowns resulted in positive S&P 500 returns (+2.29% and +10.42%, respectively). While we cannot predict the future, it would not surprise us if the same pattern repeated and much of the market damage will have occurred prior to the actual shutdown. While we do not know how long a potential government shutdown may last, we are confident that politicians in Washington, D.C., will eventually come to an agreement.
We view this potential shutdown as the latest in a series of political setbacks, like the debt ceiling impasse in the spring and the continued labor strife seen in headlines. We expect continued political turbulence as the presidential election cycle heats up in 2024. As always, we view market volatility opportunistically. We continue to navigate all market environments seeking out the companies, sectors, and asset classes we would like to purchase or own more of should any drawdown occur, with our eyes set on building long-term wealth.
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