Government Shutdown Stock Market: Why Investors Should Stay the Course

The U.S. government shut down on October 1, 2025, after Congress failed to reach a funding deal. Now, three days in, the story is not about markets tumbling. In fact, the stock market has moved higher despite the government shutdown. It is a reminder of what history has shown us time and again: shutdowns grab headlines, but they rarely derail the market’s bigger picture.

Government Shutdown History and the Stock Market

This is not the first time investors have faced a shutdown. Since the 1970s, there have been 20 shutdowns. Some of the more notable ones include:

• 1995–96: Two shutdowns, including one lasting 21 days.

• 2013: A 16-day standoff over the Affordable Care Act.

• 2018–19: The longest in history, stretching 35 days.

  
  

Despite the political theater, the stock market ultimately shook each of these off.

What the Stock Market Did During Past Shutdowns

• In 1995–96, the S&P 500 gained ground during the shutdowns and finished the winter much higher than it began.

• In 2013, the S&P 500 actually rose about 3% during the closure.

• In 2018–19, the market’s direction was driven more by Federal Reserve policy and global trade tensions than the shutdown itself.

Chart takeaway: Even though shutdowns can spark short-term jitters, history shows the S&P 500 usually rebounds quickly. On average, stocks have gained about 5.5% in the 40 days following a shutdown. In other words, the headlines may sound scary, but markets tend to move on fast.

The pattern is clear. While the government shutdown stock market relationship makes investors nervous, history shows shutdowns do not cause lasting declines.

Why Shutdowns Do Not Derail the Market

• Essential functions continue: Social Security, Medicare, and military operations go on.

• Shutdowns are temporary: Funding resumes, and workers typically get back pay.

• Bigger forces matter more: Interest rates, inflation, and corporate earnings drive markets far more than political standoffs.

  
  

Key Takeaway for Investors

If history is a guide, the current shutdown may cause short-term noise but not long-term damage. In fact, as the past few days have shown, the stock market can even rise during a government shutdown.

Bottom line: The government shutdown stock market story is mostly one of resilience. Shutdowns come and go, but markets keep their focus on fundamentals. For investors, the best move is to stay the course, ignore the headlines, and trust in the bigger picture.