History Favors Bullish Rallies After US Government Shutdowns

Government shutdowns are bullish? That’s been the history over the past 30-plus years, though there’s always the possibility that this time could be different.

Since 1981, the law has required that whenever Congress fails to pass a budget on time the government has to shut down.

While the idea of a shutdown sounds ominous, markets historically have shrugged it off.

There even have been violent gains afterwards, such as the roaring rally that occurred after the Sept. 30, 1982 event. The S&P 500 ripped 12.7 percent higher in the next month.

In fact, over the course of 11 shutdowns since Nov. 20, 1981, as first-year President Ronald Reagan squared off with Congress over taxing and spending, market reaction one month out has been negative only three times, according to Bank of America Merrill Lynch. Overall, the median gain has been 2.8 percent.

CNBC

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