Last time United States government shut down was between 1995-1996. From November 14 through November 19, 1995 and then again from December 16, 1995 to
January 6, 1996 the U.S. government shut down as a result of a
budgetary impasse between Congress and the White House. They faced another threat of shut down in 2011, but U.S government did save themselves just before few hours of the deadline.
Lets first look into what happened to U.S stock market when U.S government shut down 17 years ago in 1995-1996:
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| U.S stock market during last Government shut down period in 1995-1996 |
Interestingly as many would fear, at that time of the shut down stock markets didn't fall, let alone market crash. Dow Industrial average, popularly known as Dow Jones and Wall street showed no sign of panic or sell off.
In fact during the shut down period the U.S stock markets actually went up during the shut down of 16th December 1995 to 6th January 1996. Over the following twenty-two days White House and Congressional
negotiators struggled to hammer out an agreement over the budget, with
the end result that, by January 1996 the President, Bill Clinton then and Congress agreed
to a seven year balanced budget plan that included modest spending cuts
and tax increases. Politically speaking, President Clinton got the better of the 1995-96 government shutdown.
However, the 1995-96 government shutdown demonstrated the costs of
divided government and, more importantly, shifted the political
discourse to the right. Although the budget deal restored many of the
Republican's proposed cuts in domestic spending, Clinton adopted a more
centrist position for the remainder of his presidency. Clinton's move to
the right was exemplified in his State of the Union Address of January
27, 1996, in which he declared that "the era of big government is over."
Buy fear, sell greed for the U.S stock market??
Its 2013 now and yet again U.S government is facing a shut down threat, like it faced in 2011 as well. At literally the 11th hour Friday night, April 8, 2011, House, Senate, and Obama administration
avoided a government shutdown and came to agreement on a budget for the
rest of the fiscal year that nobody really loved but that all were willing to
live with it then.
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| Dow Jones charts during the U.S government shut down threat period of 2011 in April |
Even then Dow Jones didn't tank during U.S government shut down fear/threat
in 2011. Though the markets topped out only in May 2011 around 12920 DJI
, few days after the house came to an agreement in April, before
finally making a bottom/base between the period of September to October
2011 near 10400.
Wall street always plays things differently. They buy fear and they sell greed. I have seen this phenomenon working the best on the Wall street more than any where else amongst the markets I observe.
Anyway, that's what you are supposed to do in any global stock market! If you really want to be successful Trading or Investing Always buy fear and sell greed.
Good Luck and Happy Safe Trading!!
