January 15, 2019

Damien Troy

How government shutdown could impact trading in the U.S.

The government shutdown in the US has been a widely publicized ordeal and has certainly grabbed the attention of anyone that is involved with trading. No matter which discipline you operate with, people are taking a more intense look at the finite details to ensure they are not affected by the current predicament.

So whether you work within swing, momentum or commodity trading, we have taken a closer look at the current situation and whether the recent developments could have an effect on the current network in place within America.

What is the U.S. government shutdown?

The American government was shut down partially last month since the current Congress could not reach a suitable agreement in which to authorize a funding deal needed to keep it active. One of the primary issues came about President Trump’s insistent plans to build a wall between the US and Mexico. Such a move required a bill to be funded in the region of $5 billion.

With all the questions and uncertainty surrounding the distribution of government funds in the weeks leading up to the shutdown, the stocks started to fluctuate hugely and cause major disruptions with some of the biggest names around. The effects were not decisive in making stock prices fall, but there was certainly a level of volatility that hasn’t been experienced for a long time.

How is the shutdown affecting the U.S. as a whole?

The shutdown of a government, whether partial or otherwise, will always have an effect on the country’s day to day operation and the US has been no exception. Here are some of the most important problems from the U.S. government shutdown:

• Many people traveling are experiencing huge delays

• Farmers are struggling to obtain the necessary loans to operate

• Start-up businesses are feeling the crunch

• Court decisions are being put on hold

• People are missing their mortgage and rental payments

• U.S. credit ratings are starting to drop

Can shutdowns affect trading in America?

In order to ascertain what the effects of the current situation could be, we will need to look at the last time a shutdown took place: January to February 2018. The last time the government experienced such an event, the US market was savvy and managed to put contingency plans in place to ensure they were not affected in any way.

In fact, it appears from previous years that the American stock market never seems to be too fussed when it comes to government shutdowns. This was evident by the fact that, in 2018, the market managed to rise by 0.8% despite opening to a locked-down governmental system.

The numbers from the previous government shutdowns have been taken into consideration from the years 1976 to 2013. During the 18 occurrences that took place, it was discovered that the median changes with the S&P 500 were actually 0.0%, with the mean being recorded as -0.6%.