Government Shutdown Unfazed by Record-Breaking Stock Market Highs

Despite the ongoing government shutdown, U.S. stocks have managed to reach unprecedented heights. The S&P 500 and Dow Jones Industrial Average both closed at all-time peaks, demonstrating Wall Street’s resilience amidst political uncertainty.

The S&P 500 saw a 0.34% increase, ending at 6,711.20, while the Dow Jones Industrial Average gained 43.21 points (0.09%), settling at 46,441.10. The Nasdaq Composite also made significant strides, jumping 0.42% to reach 22,755.16.

The federal government is currently experiencing its first shutdown in nearly seven years due to Congress’ inability to reach a funding agreement. However, historical data suggests that the stock market remains largely unaffected by government shutdowns. Since 1976, there have been 20 government shutdowns, each averaging eight days in length. Following each shutdown, the S&P 500 gained an average of 1.2% and 2.9% in the one- and three-month periods, respectively.

The current shutdown has halted the collection and release of crucial economic data, including the September jobs report initially scheduled for release on Friday. This could potentially complicate the Federal Reserve’s decision-making process in their upcoming October 29 meeting. As it stands, money markets are strongly predicting a 25-basis-point cut to the Fed’s key interest rate.

While typical shutdowns have minimal lasting economic impact, economists warn that this one could be different. President Trump has threatened permanent layoffs as opposed to temporary furloughs for federal workers, which could lead to more significant economic consequences. However, most analysts believe the market impact will remain limited unless the shutdown extends beyond mid-October.

Source: CNBC