Shutdown Watch 2023

The US government temporarily averted a shutdown after the House and Senate passed a 45-day funding deal on September 29. But the specter of a shutdown still looms if a longer-term funding resolution fails to materialize before the stopgap ends.

The US government has faced 14 funding gaps since 1981, ten of which resulted in shutdowns.¹ During these shutdowns, many non-essential functions of the government cease. In most cases, the fiscal shortfall was resolved within a few days. Some impasses, like the December 1982 episode, lasted merely a weekend. However, four shutdowns lasted at least one week. How did stocks fare during these prolonged episodes? The US market ended higher at the conclusion of three and was flat in the other.

So, while a shutdown may be a nuisance,² history suggests it's probably not cause for concern in your portfolio

1. The appropriations process through which the federal government budget is allocated became stricter about shutting down government operations in the event of a funding gap after legal opinions issued in 1980 and 1981.

2. Especially for those with travel plans, since the impacted services may include the TSA.

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Index Descriptions

Fama/French US Total Market Index: Fama/French Total US Market Research Factor One-Month US Treasury Bills. Source: Kenneth R. French - Data Library (dartmouth.edu).

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About the Author

Wes Crill - PhD, Senior Investment Director and Vice President - Dimensional Fund Advisors

Wes earned a BS and a PhD in materials science engineering from North Carolina State University. As a member of the Investment Solutions Group at Dimensional Fund Advisors, he directs empirical research on a broad range of investment topics to support client relations.

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