Could a US govenment shutdown affect Wall Street?

A looming US government shutdown could impact Wall Street.

Wall Street sign Source: Bloomberg

The US government is on the verge of a possible partial shutdown at the end of the week. The political standoff could not only hurt US residents, but influence Wall Street as well.

How US government can affect Wall Street

The US government could be closed because of a wall. Republican US President, Donald Trump, wants federal funding to build a wall across the US-Mexico border to try to prevent undocumented Mexican immigrants from crossing into the US. His Democratic opponents, Representative, Nancy Pelosi, and Senator, Charles Schumer, oppose adding the wall to the Congressional 2019 spending agenda. They believe that building the border wall is a xenophobic and ineffective idea. Trump noted in a meeting with Pelosi and Schumer that he ‘would be proud’ to shut down Washington over Congressional funding for the structure.

While federal workers could be affected by the government grinding to a halt, Wall Street may not be impacted as much by the latest political battle if history is any indication. In previous stoppages in the 1990s, shares actually increased.

During the 1995 deadlock between former President, Bill Clinton, and previous Speaker of the House, Newt Gingrich, the stock market briefly fell, then rose by 0.8%. The showdown between former US President, Barack Obama, and Congress in 2013 was also ignored by Wall Street. Shares surged 3% during the political stalemate.

Why Wall Street survives government shutdowns

Mark Stoeckle, CEO of Adams Funds, said that Wall Street can tune out the impasses in Washington because it doesn’t always directly impact investors.

‘Events like a government shutdown are just part of the growing noise coming out of Washington that investors should ignore,’ said Stoeckle.

The US stock market also thrives during a government shutdown because the gridlock tends to be short-lived. It’s also more likely to be affected by the recent overall downturn in shares than in partisan arguments.

Investors and US residents will still be watching the White House and Congress to see what happens next.

Related articles

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.


The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.