How the S&P 500 performed after 10 previous government shutdowns

With the government shutdown nearing its one-week mark, investors may be monitoring how the stalemate in Washington is affecting their portfolios.

So far, stocks have been doing just fine. Although the S&P 500 was down slightly on Tuesday, the index returned 0.80% between Oct. 1 and Oct. 6 — and even notched several new highs.

It turns out that market gains during and following a government shutdown are not unusual.

“Historically, shutdowns themselves have rarely derailed equities,” said Cathy Curtis, a certified financial planner and the founder and CEO of Curtis Financial Planning in Oakland, California. Curtis is also a member of CNBC’s Financial Advisor Council.

The S&P 500 spiked 36% during the year after the last government shutdown, which ended in early 2019, Morningstar Direct found. One hundred days following the 1982 shutdown, the index was up 19.7%.

“Markets are forward-looking and tend to price in future conditions, not current noise,” said Andrew Hiesinger, founder and CEO of Quant Data, a market information platform.

Post-shutdown gains aren’t universal. For example, 100 days after the January 2018 shutdown, the S&P had fallen 4.5%, and was still down 3.1% at the one-year mark.

The stock market isn’t performing too poorly during the current shutdown because investors are betting on softer inflation and eventual rate cuts from the Federal Reserve, Hiesinger said.

“The market has learned to discount recurring political drama that rarely changes long-term fundamentals,” he added.

That means investors can temper their reactions to the headlines, too, Curtis said.

“The best response to a shutdown is usually no reaction at all,” she said. “Staying invested through uncertainty has historically rewarded those who remain patient.”

The S&P 500 shutdown performance data also shows the benefits of investing in a diverse basket of stocks, such as through exchange-traded funds or mutual funds, rather than in any one individual company.