The idea that a
#GovernmentShutdown is a black swan event that will dump the market hard is one of the most persistent myths in trading.
Here is my take on why this narrative is often more noise than signal, followed by a different angle that focuses on the mechanics of the market rather than the drama of D.C.
👍The Reality: Why This Dump is Usually a Dud.
If you’re looking for a crash, history isn’t on your side. In the last 20+ shutdowns since 1976, the S&P 500 has actually been positive during the shutdown period about half the time. The average return during these crises is a flat 0.1%.
📈Markets don't fear shutdowns; they fear long term defaults (which this isn't). A shutdown is essentially a forced vacation for non essential workers. The market knows two things for certain:
• The money is eventually approved.
• The furloughed workers eventually get back pay.
The real risk isn't the shutdown itself it's the Information Blackout.
When the government stops publishing jobs and inflation data, the Federal Reserve has to fly blind. That doesn't cause a
#dump , it causes sideways chopping because nobody has enough data to make a big move.