Government shut down and the effects on the stock market

  • 10/2/2013 1:09:36 PM
  • Daniel

It’s been pretty big news that the government has shut down a number of functions today, we thought it might be a good time to look at how this has effected the stock market and possibly your virtual portfolios.

This isn’t the first time the government has shut down, back in 1995 this same event occurred (for different political reasons).

The Standard & Poor's 500 fell 3.7% during the government shutdown period that ran from mid-December 1995 to early January 1996 however stocks quickly rebounded after the government got back to work, rising 10.5% in February. But during that January period a jolt was certainly felt across the markets.

This time round in 2013 the story seems to be a little bit different, Americans continue to suffer from a relatively high unemployment rate of 7.3%, which is about 2 percentage points higher than in December 1995.

As we enter day 2 of the shutdown we see that stocks are still holding steady with all three indexes rising after markets re-opened on Tuesday. Goldman Sachs estimates a three-week shutdown could shave as much as 0.9% from US GDP this quarter.

So as of today you should still see lots of green in your student stock trading app indicating that the market is still positive and not viewing the shutdown as a comment on the broader economy.


Happy virtual investing.