Investors Shouldn't Fear a Government Shutdown

Why Investors Shouldn't Fear a Government Shutdown

By Steve Rothwell and Ken Sweet

— Sep. 28 3:00 PM EDT

 NEW YORK (AP) — The government shuts down. The economy unravels. Stocks plunge.

That may be Wall Street's worst fear, but history shows it's mostly overblown.

There have been 17 government funding gaps and shutdowns since 1976, ranging in length from one to 21 days. A funding gap is when federal agencies continue to operate without the passage of a regular appropriations bill. None has caused a market meltdown.

The average decline in the Standard & Poor's 500 index during one of these periods lasting 10 days or more is about 2.5 percent. For those lasting five days or fewer, the average decline is 1.4 percent.

"If they shut the government down for two days, the world's not going to stop revolving," says Ron Florance, deputy chief investment officer for Wells Fargo Private Bank.

A shutdown may even offer a buying opportunity.

Investors should consider the improving outlook for the global economy instead of worrying about Washington.

7:41 am Monday Sept 30th

As I write the Dow is down more than 100 points. At the same time, 3 out of the 4 stocks in our Core Equities Folio are up.

Core Equities Folio

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GWM Model Portfolio Core Equities Folio Allocations:

Go Getter = 40%

In Betweener = 30%

Golden Years = 10%

The Core Equities Folio is primarily comprised of very large and liquid leading stocks. At times, these leading stocks follow the beat of their own drum. So, when the general market is stumbling, these stocks can actually continue to rise or go sideways. In a way, they help provide meaningful diversification.

I will more than likely be raising the Core Equities Folio Allocation to 20% from it's current 10% in the Golden Years Model Portfolio before long.

By the way, as I am finishing this blog post, all positions are now positive while the Dow is down 95 points.

8:04 am

Core Equities Folio

This blog post does not constitute an offer of investment advice. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.