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What Happens to Market When the Gov't Shuts Down?
A visual breakdown
J.L. Bernstein
October 05, 2025
In partnership with
Happy Sunday
I really try to be useful with these Sunday articles, something that I enjoy learning more about or that I think makes me a more informed person than I was before the read.
I know today’s political backdrop is a bit different than previous shutdowns but you know the Ol’ saying.
“History Doesn't Repeat Itself, but It Often Rhymes”
This one’s more for the visual learners (like me).
So here it was the market did the last 18 shutdowns…
Please click on images to enlarge them.
Date | President | Days | S&P 500 | Issue |
|---|
Sep 30 - Oct 11, 1976 | Ford | 10 | -3.4% | Funding disputes |
Sep 30 - Oct 13, 1977 | Carter | 12 | -3.2% | Abortion funding |
Oct 31 - Nov 9, 1977 | Carter | 8 | +0.7% | Abortion funding |
Nov 30 - Dec 9, 1977 | Carter | 8 | -1.2% | Abortion funding |
Sep 30 - Oct 18, 1978 | Carter | 17 | -2% | Public works funding |
Sep 30 - Oct 12, 1979 | Carter | 11 | -4.4% | Abortion funding |
Nov 20-23, 1981 | Reagan | 2 | -0.1% | Spending cuts |
Sep 30 - Oct 2, 1982 | Reagan | 1 | +1.3% | Social events |
Dec 17-21, 1982 | Reagan | 3 | +0.8% | MX missile |
Nov 10-14, 1983 | Reagan | 3 | +1.3% | Education/defense |
Sep 30 - Oct 3, 1984 | Reagan | 2 | -2.2% | Crime bill |
Oct 3-5, 1984 | Reagan | 1 | +0.1% | Civil rights |
Nov 14-19, 1995 | Clinton | 5 | +1% | Medicare/spending |
Dec 15, 1995 - Jan 6, 1996 | Clinton | 21 | +0.1% | Medicare/spending |
Sep 30 - Oct 17, 2013 | Obama | 16 | +3.1% | Obamacare |
Jan 19-22, 2018 | Trump | 3 | +0.8% | General funding |
Feb 9, 2018 | Trump | 0.5 | +0% | Brief lapse |
Dec 22, 2018 - Jan 25, 2019 | Trump | 35 | +10.3% | Border wall |
 |  |
MY TAKE:
Currently the market is basically telling politicians: “We don’t care about your theater.” Bank of America found the S&P 500 averages a 1% gain from the week before to the week after a shutdown since 1990.
The last big shut down 2018-2019 “ 10.3% rally during shutdown” is misleading.
December 2018 was heading for the worst month since the Great Depression. The market was getting massacred, down over 10% for the month. Christmas Eve 2018 was the worst performance on record.
The shutdown started near the bottom. The real catalyst for the rally was the Fed’s January 30th pivot to being “patient” on rate hikes, not the shutdown ending. This was a technical bounce from panic selling, not a vote of confidence in dysfunctional government.
Big picture context last shutdown: Fed hiking too fast, trade war with China escalating, tech selloff, overvaluation fears all converging.
The real risk with the current 2025 shutdown?
It's happening when inflation is rising in key categories that hit all of us the hardest.
Outlier categories currently driving inflation:
food (+3.2% annually)
shelter (+3.6%)
medical care services (+4.2%)
Used cars and trucks saw a 6% annual increase.
All this while the labor market is weakening, and the economy looks vulnerable.
That’s a different backdrop than 2013, 1995, and the end of 2018 when economies were strong.
But historically? Shutdowns are speed bumps, not roadblocks. The market has learned they’re temporary political tantrums that get resolved. Unless this one drags past 4-6 weeks or the economy starts genuinely cracking, I’m expecting more of the same: brief volatility, then back to business as usual.
Stay curious 🙂
- John
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