🚨 The Government Shutdown "Black Swan" Myth: Why Markets Often Shrug It Off
The idea that a #GovernmentShutdown will cause a severe market crash is one of the most persistent trading myths. History suggests the reality is far less dramatic.
📊 The Data Tells the Story
Over the past 20+ shutdowns since 1976, the S&P 500 has been positive about half the time during the shutdown period. The average return? Essentially flat at +0.1%.
🤔 Why No Panic?
Markets aren't afraid of temporary shutdowns; they fear long-term sovereign defaults (which this isn't). A shutdown is essentially a forced, temporary pause. The market knows two things:
1. Funding is eventually approved.
2. Furloughed workers receive back pay.
⚠️ The Real Risk: An Information Blackout
The most significant market impact isn't a crash—it's choppy, sideways action. When key data (jobs, inflation) stops being published, the Federal Reserve must "fly blind," and traders lose fundamental anchors. This doesn't spark a #dump; it creates uncertainty and range-bound trading until clarity returns.
Bottom Line: While politically dramatic, a government shutdown is historically a non-event for market direction. The smarter focus is on the data vacuum it creates, not on anticipating a crash.