Will the Shutdown Shut Down the Dow?

So the Republican-led House and Democratic-led Senate failed to set a budget in time for the new fiscal year that began today. The government has gone into an official shutdown mode, which sounds like the end of the world. But it's not.

The U.S government has been furloughed before. Not just once or twice, but 18 times since 1976. There were eight shutdowns in the 1980s, none longer than three days. The last incident totaled 28 days over two segments in 1995 and 1996 after President Bill Clinton vetoed a budget passed by the two Republican houses of Congress.

Here's the good news: None of these shutdowns destroyed the American economy. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) has grown more than 16-fold since the first no-budget shutdown, and here's what happened during Clinton's battle with an entirely Republican Congress:

^DJI Chart

^DJI data by YCharts.

That's right: The market just chugged along without government support. The Dow closed 7% higher by the end of the 1995-1996 showdown, simply carrying out the momentum that was set by a 33% rise in 1995.

They say that it's different this time. The president is building his legacy on the Obamacare health care program, which tea party Republicans want to eliminate. That's the core of this gridlock and everything else is just noise. Neither side looks likely to fold entirely, and compromise has become a four-letter word. So I wouldn't be surprised to see this shutdown last as long as the Clinton impasse, which lingered amid temporary stopgaps until the final budget was signed in April 1996.

But, again, it's not the end of the world -- unless your government paycheck just got stuck in Washington gridlock. The rest of us -- and the stock market -- will do just fine until this storm passes.

What are the biggest winners in a global recovery?
Set the government shutdown aside for a moment to think about the global recovery. With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2663587, ~/Articles/ArticleHandler.aspx, 9/30/2016 3:04:36 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,346.00 202.55 1.12%
S&P 500 2,172.41 21.28 0.99%
NASD 5,323.02 53.86 1.02%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 2:49 PM
^DJI $18345.24 Up +201.79 +1.11%