This morning I went to log in to my Amex account to check how this months spending is going. I see the above, concerning the Govt shutdown.
I thought to myself, I might help investors explain the impact of such a thing on the stock market. I did some research and found that of course there were stats on this. There were 18 shutdowns, spanning the period from 1976 to 2013 and the median effect on the S&P 500 was -0.6%. Quite negligible.
In fact, this current shutdown has seen markets go up aggressively however did come on the back of a massive sell down.
This one may be a little different, only because of its length. It’s the longest in history, 31 days and counting. See previous shutdowns merely just delayed spending for a while, this one might have a more significant impact on earnings/revenue reports in the next quarter. Delta airlines are reporting they have lost 25 million in sales due to fewer bookings.
While historically GDP figures are barely affected the prolonged nature of this one might. See the longer it goes, the more unsure people become about the future, and as such, they start to spend less. Not too mention the 400,000 thousand workers who might think about saving more once they get paid because they fear further government shutdowns, and who is to say they would be wrong considering how entrenched both sides of USA politics are.
One to watch, the longer it goes, the more impact it will have on earnings and future growth. The longer it goes will also mean we will see the R-word more, and while that is unlikely in my opinion, it does nothing for consumer confidence which is one of the underlying drivers of higher stock prices.
What are your thoughts?