Scott Minerd: Asset Prices After the Shutdown

This week I’ve read six dozen or so articles and blog posts about how stocks typically act before and during a government shutdown. But we don’t hear a lot about other asset classes or about the aftermath.

Scott Minerd, Chief Investment Officer at Guggenheim Partners, has a chart out depicting exactly that:

Gauging the Impact of Government Shutdowns

There have been 17 U.S. federal government shutdowns since 1976. Excluding drastic moves in commodity prices and bond yields in the late 1970s, analysis of eight occasions during the past 30 years reveals that U.S. equities and the dollar tend to decline during shutdown periods, while gold and commodities tend to perform well. Shutdown periods do not appear to have a significant effect on 10-year Treasury yields. Historically, when a shutdown ends, market performance reverses quickly, and Treasury yields fall by an average of 22 basis points over the following 10 days.

The economic impact of a shutdown largely depends on its duration. According to consensus estimates, a week-long shutdown would cut annualized GDP growth by approximately 25 basis points in the fourth quarter.

Source:

Guggenheim Partners