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Government Shutdown – Our Quick Thoughts

I woke up this morning, and the sun still rose on this first day of the first government shutdown since 1996. Below are some important points everyone should consider. 

  • We’ve had 17 prior government shutdowns since 1976.
  • On average, market reaction has been modest – see yesterday’s blog for a great graphic.
  • Social Security, Medicare, the mail, the National Weather service, air traffic controllers and the military will all be operating; it’s non-essential services that closed.  Non-essential government services? Hummmm….
  • No one in government will be working on releasing economic data, and that probably includes nonfarm payrolls and the unemployment rate on Friday.
  • The equity markets are up a little less than 1% at the time of this writing (11am – CNBC).
  • Finally, the media has to write and report on stories EVERY DAY, meaning they always need something to fill airtime and newspapers. Take that into consideration here.

So the real question is, “What is the economic impact?” A few days won’t make a huge impact, but a longer shutdown brings us to the debt ceiling debate. If Congress does not raise the debt ceiling, we will be in uncharted waters. We know from watching the markets in August of 2011 that it’s not looked upon as a ‘non-event”.

The bright spot is that a number of leading indicators have been pointing to some economic momentum, including today’s unexpected rise in the ISM Manufacturing Index which improved from an index level of 55.7 in September to 56.2 in October. A reading of above 50 signals manufacturing expansion.

So what is the best strategy, considering the circumstances? Maintain confidence in your long-term plan and investment strategy. There are plenty of fools out there trying to trade around the outcome of the shut down and the pending debt crisis.  It’s like flipping a coin – some will be right and some will be wrong, but if you win one flip (sell and raise cash) you have to flip the coin again to guess when to get back in to the market.

Those are bad odds – even in Vegas.

Please call or email with questions.

Investment advice offered through Monument Advisory Group, LLC a Registered Investment Advisor (RIA). Securities offered through LPL Financial.  Member FINRA/SIPC.  Monument Advisory Group and Monument Wealth Management are separate entities from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal.

 

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David B. Armstrong, CFA

President & Co-Founder

Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....

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