What Is The Stock Market Going To Look Like After The Shutdown?

Image by: Rodrigo Saldon
By Michael Sterling

Investors’ confidence in the market is spiraling further down a hole, according to a survey by the Center for Audit Quality (CAQ). Every day, $300 million is lost from the 800,000 federal employees out of a job. That’s equivalent to 0.69% of U.S. daily economy. A 2-week shutdown will potentially cost .027% of the $15.7 trillion economy. That’s a lot of cash.

The good news is that the stock market is rarely are affected by government shutdowns. In fact, according to Blooberg, they perform “”better than average” the year after each of the last 17 have happened. But if it keeps up, this would be the first time, ever, for it to surpass the debt ceiling. Can this ultimately affect your investments?

Fear Of Default = Sell, Buy, Keep

Imagine the anxiety you get when your credit card is in default. Now times that by a trillion and you are beginning to see the idea of what might happen when our entire country could go to default. Many investors are selling their stock out of panic. This, though it might ease their anxiety, is not a very smart tactic.

When the shutdown is over, we are likely to see a bounce in the near future. If you’re out of stock, you’re going to be out of luck. Think of it like a credit card. Most people who finally pay off their credit card debt usually end up doing what? Buingy another credit card and repeating the same pattern. Take it as an opportunity.

If people are selling their stock, don’t hesitate in purchasing if it fits into your portfolio. Typically the assets which are tied with the U.S., like treasury bonds, are likely to sell first. Try holding on to most, if not all, your assets at this time – especially ones that play on a global picture, like Gold ETFs, Silver ETFs, or oil companies.

International Diversification

It’s no surprise that the world is starting to believe we’re losing our footing in the financial markets. Soon, according to predictions, international investors will start to look at U.S. markets as a liability – at least for now. This means lots of money will be going towards emerging markets, and frontier markets.

Now is the time to be an opportunist. Funds which are managed locally are always going to be better than ETFs centered around one particular country. A government shutdown can be one of the biggest opportunities for you to pay attention to the market. Consider it a giant premonition of the world’s perspective on our domestic spending.

Tip: Investing professionals have recommended countries whose economy is just starting to blossom. Southeast Asia and Sub Saharan Africa are great markets to look for if you want to watch your money grow. 

401 (K) Panic

Stock prices are reflective of future earnings, and anything which affects that will ultimately affect 401 (K)s. The recession is still strong in people’s memories. Since the 401 (K) is typically grown by your company, many businesses are fearing future deposits.

One alternative many investors have done is to transfer their cash to an IRA account. It’s typically a lot safer from interference, plus it gives you more control over your retirement. Not only can this ease your anxiety, but it keeps your money from fluctuating. A safety net is always a good thing.