The average investor panics when they hear "government shutdown."...
Kintsugi Investing@kintsugiinvest
63 views
Oct 01, 2025
~3 min read
Advertisement
1
The average investor panics when they hear "government shutdown."
But history tells a very different story.
In fact, the S&P 500 has risen 12.7% on average in the 12 months after a shutdown.
Here’s why smart investors stay calm during chaos:🧵
But history tells a very different story.
In fact, the S&P 500 has risen 12.7% on average in the 12 months after a shutdown.
Here’s why smart investors stay calm during chaos:🧵
2
Every time a shutdown hits the headlines, the fear machine turns on:
• Federal workers furloughed
• National parks closed
• “Markets in turmoil” warnings
But when you zoom out, a pattern emerges.
The market doesn’t just recover, it often thrives.
• Federal workers furloughed
• National parks closed
• “Markets in turmoil” warnings
But when you zoom out, a pattern emerges.
The market doesn’t just recover, it often thrives.
3
Since 1976, there have been 21 government shutdowns.
Average duration:
→ 8 days.
Market reaction during those periods:
→ Basically flat: +0.3% on average.
But what happens after?
That’s where it gets interesting.
Average duration:
→ 8 days.
Market reaction during those periods:
→ Basically flat: +0.3% on average.
But what happens after?
That’s where it gets interesting.
4
In the 12 months following a shutdown:
• The S&P 500 has posted positive returns 86% of the time
• With a median gain of 12.3%
Translation:
Markets get over political drama fast...and investors who hold through the noise get rewarded.
• The S&P 500 has posted positive returns 86% of the time
• With a median gain of 12.3%
Translation:
Markets get over political drama fast...and investors who hold through the noise get rewarded.
5
Let’s go deeper:
Even the longest shutdown in U.S. history - 34 days from Dec 2018 to Jan 2019, wasn’t a disaster.
Despite the headlines, the S&P 500 gained 10.3% during the shutdown.
And it went on to rise 23.7% over the following year.
Even the longest shutdown in U.S. history - 34 days from Dec 2018 to Jan 2019, wasn’t a disaster.
Despite the headlines, the S&P 500 gained 10.3% during the shutdown.
And it went on to rise 23.7% over the following year.
6
How can that be?
Because markets care less about politics and more about profits, interest rates, and liquidity.
And unless a shutdown triggers a true economic shock, the long-term fundamentals barely flinch.
Because markets care less about politics and more about profits, interest rates, and liquidity.
And unless a shutdown triggers a true economic shock, the long-term fundamentals barely flinch.
7
"But this time is different," maintstream media will say.
• Trump blames Congress.
• The Fed is "flying blind."
• Economic data is delayed.
• Growth forecasts are trimmed by 0.1–0.2% per week.
Valid concerns. But temporary friction ≠ permanent damage.
• Trump blames Congress.
• The Fed is "flying blind."
• Economic data is delayed.
• Growth forecasts are trimmed by 0.1–0.2% per week.
Valid concerns. But temporary friction ≠ permanent damage.
8
Yes, prolonged shutdowns can create drag:
• Delayed unemployment & inflation reports
• Disrupted federal contract work
• Consumer spending slowdown
But the historical evidence is clear:
These events rarely derail bull markets.
• Delayed unemployment & inflation reports
• Disrupted federal contract work
• Consumer spending slowdown
But the historical evidence is clear:
These events rarely derail bull markets.
9
Markets price in fear fast.
That’s why early shutdown volatility tends to fade as clarity returns.
What matters more?
• Staying invested
• Managing risk
• Avoiding emotional decisions during policy theatrics
• Adding high-quality positions when stocks go on discount
That’s why early shutdown volatility tends to fade as clarity returns.
What matters more?
• Staying invested
• Managing risk
• Avoiding emotional decisions during policy theatrics
• Adding high-quality positions when stocks go on discount
10
Think of shutdowns like controlled burns in a forest.
They create short-term smoke.
But they don’t destroy the whole ecosystem.
And they rarely impact the big trees - earnings growth, labor strength, Fed policy.
Unless paired with bigger catalysts.
They create short-term smoke.
But they don’t destroy the whole ecosystem.
And they rarely impact the big trees - earnings growth, labor strength, Fed policy.
Unless paired with bigger catalysts.
11
Want to see how resilient markets have been?
After the 5 longest shutdowns, the S&P 500 was:
✅ Positive 12 months later in 4 out of 5 cases
✅ Up as much as 36.2% (after the 1982 shutdown)
✅ Flat or modestly negative only once
After the 5 longest shutdowns, the S&P 500 was:
✅ Positive 12 months later in 4 out of 5 cases
✅ Up as much as 36.2% (after the 1982 shutdown)
✅ Flat or modestly negative only once
12
Even shutdowns under uncertain political regimes didn’t tank markets.
Whether it was:
• Carter with a Democratic Congress
• Reagan with a split
• Trump with Republican control
The market outcome stayed surprisingly steady.
Whether it was:
• Carter with a Democratic Congress
• Reagan with a split
• Trump with Republican control
The market outcome stayed surprisingly steady.
13
So what should you do when the news cycle screams “shutdown crisis”?
• Don’t dump stocks on fear
• Don’t chase gold just because it spikes
• Stay calm, zoom out, and think 12 months ahead
• Buy high-quality stocks when they go on discounts
Shutdowns make headlines - not history.
• Don’t dump stocks on fear
• Don’t chase gold just because it spikes
• Stay calm, zoom out, and think 12 months ahead
• Buy high-quality stocks when they go on discounts
Shutdowns make headlines - not history.
14
The bottom line:
Shutdowns create noise, not lasting damage.
If you’re investing for the next decade - not the next hour, you’ll do just fine.
Buy if you see opportunity (discount)
Do nothing if you have no additional cash to deploy.
Discipline, not drama, builds wealth.
Shutdowns create noise, not lasting damage.
If you’re investing for the next decade - not the next hour, you’ll do just fine.
Buy if you see opportunity (discount)
Do nothing if you have no additional cash to deploy.
Discipline, not drama, builds wealth.
15
Liked this?
We share deeper breakdowns of events like Tariffs and market drawdowns in our newsletter.
A smart investor hones his mind to stay calm under chaos.
Join over 510 regular readers:
newsletter.kintsugiinvesting.com/subscribe
We share deeper breakdowns of events like Tariffs and market drawdowns in our newsletter.
A smart investor hones his mind to stay calm under chaos.
Join over 510 regular readers:
newsletter.kintsugiinvesting.com/subscribe
16
We're Zee & @thehowietan:
• Contrarian investors
• Focused on resilient investing
• On a mission to help everyday investors build & repair portfolios
Follow @kintsugiinvest for more.
If this was useful, Like & Retweet so others can learn too.
• Contrarian investors
• Focused on resilient investing
• On a mission to help everyday investors build & repair portfolios
Follow @kintsugiinvest for more.
If this was useful, Like & Retweet so others can learn too.
Kintsugi Investing@kintsugiinvest
The average investor panics when they hear "government shutdown."
But history tells a very different story.
In fact, the S&P 500 has risen 12.7% on average in the 12 months after a shutdown.
Here’s why smart investors stay calm during chaos:🧵
But history tells a very different story.
In fact, the S&P 500 has risen 12.7% on average in the 12 months after a shutdown.
Here’s why smart investors stay calm during chaos:🧵