How The S&P 500 Performs When The Government Shutdowns

Government shutdown definition from Wikipedia 

In U.S. politics, a government shutdown is a situation in which the government stops providing all but “essential” services.[1] Typically, services that continue despite a shutdown include police,fire fighting, the National Weather Service and its parent agencies, medical services at federal facilities, the postal service, armed forces, air traffic management, and corrections (the penal system).

 

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Below various details of S&P 500 Index Change% during the previous 17 Historical Government Shutdowns since 1976.

Trading odds for $SPX longs on first day of shutdown

  • Winners : 8
  • Losers : 9
  • % Winners : 47%
  • Average Change % : 0.08
  • Median Change % : -0.07
  • Maximum Gain % : 2.54
  • Maximum Loss % : -1.55
  • Average Gain %if Winner : 0.87
  • Average Loss % if Loser : -0.63
  • Average Gain % / Average Loss % : 1.38

ps: for the Government Shutdown’s on the day when market is closed , the first trading day after the date , is considered , for ex: on 30-Sep-78 , when the Government shutdown was announced , we considered the $SPX change% details , for 2nd Oct-78)

We have no idea , when the Government shutdown ends in advance , but here is how $SPX fared during the Government shutdown period.

  • Winners : 8
  • Losers : 9
  • % Winners : 47%
  • Average Change % : -0.72
  • Median Change % : -0.09
  • Maximum Gain % : 1.92
  • Maximum Loss % : -3.75
  • Average Gain %if Winner : 0.84
  • Average Loss % if Loser : -2.10
  • Average Gain % / Average Loss % : 0.40

Below the table with details $SPX Open on the day of Government shutdown and the $SPX close when the shutdown ended.

$SPX during Government Shutdown

looking at various scenarios the best exit period is after 10 trading days , and below the trading odds after 10 trading days , for the $SPX longs

  • Winners : 12
  • Losers : 5
  • % Winners : 71%
  • Average Change % : 1.14
  • Median Change % : 1.05
  • Maximum Gain % : 11.75
  • Maximum Loss % : -4.79
  • Average Gain %if Winner : 2.71
  • Average Loss % if Loser : -2.64
  • Average Gain % / Average Loss % : 1.03
  • Average Absolute Change% : 2.69

Interestingly since 81 , $SPX closed higher after 10 trading  days ( 11 out of 11 times ) , below the trading odds for for $SPX longs with exit period set to 10 trading days , from the day Government shutdown starts

  • Winners : 11
  • Losers : 0
  • % Winners : 100%
  • Average Change % : 2.66
  • Median Change % : 1.75
  • Maximum Gain % : 11.75
  • Maximum Loss % : 0%

Below the details of $SPX change over the next 1/2/3/4/5/10/20 trading days , from the date of Government Shutdown

ps: t, is the change% on the day of shutdown, t+1 , is the change% 1 trading day after the shutdown start.

$SPX over next trading day(s) from the day of  Shutdown

 

 

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Source: Paststat

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