Why investors shouldn’t fear a shutdown

Talk of a partial government shutdown won’t put the nearly 9-year-old bull market on the endangered species list.

The reason?

The government has shuttered its doors for non-essential business 18 times since 1976 and the stock market never suffered a big drop despite all the political drama. And there’s still a chance Republicans and Democrats will cut a budget deal in time to avoid a shutdown this weekend.

The largest decline was a 4.4% dip for the Standard & Poor’s stock index in fall

1979, when an 11-day shutdown occurred on the watch of President Carter and a Democratic-controlled Congress, according to data from LPL Financial. The average fall was a far more modest

0.6%.

“Although a government shutdown seems scary, the reality is it has been a non-event historically for stocks,” Ryan Detrick, senior market strategist at LPL, noted in the report.

In fact, stocks actually rose 3.1% during the 16-day shutdown in fall 2013 — which was the second-longest behind an 18-day event in 1978.

The reason stocks don’t fall dramatically when the government closes its doors at places such as national parks and furloughs non-essential workers that do things such as process passport requests and small-business loan applications is that they tend to be shortlived. As a result, they tend to have very little negative economic impact.

So if the hot stock market of 2018 is to cool off dramatically, it will likely be some other hiccup that derails it.