Fire and Brimstone

August 28, 2023

We will have a government shutdown in October. I know, I know. You wonder how I can be so sure. Well, I’ve had my palm read, a Tarot card reading, and just to make sure, I’ve triple checked my astrology charts. All signs point to a catastrophic ending to society because politicians bicker over finances

This is the first time in a long while I think the government will shut down. I don’t know for how long, but I’d say it’s better than a 50-50 shot it will happen, and frankly, it could be longer than some think.

Before we all start running around with our hair on fire, let’s grab a bit of perspective.

What are we going to do about it when it comes to investing? And the answer is we’ll let the market tell us what to do. I know many of us will automatically think that this is a horrible thing for the markets, and we should be retreating to the safety of cash, T Bills, or even CD’s. The reality is that the market has viewed these shutdowns very differently than we’d think.

I took the time to look at the last 10 shutdowns and see what happened. Frankly, I was surprised. 5 out of the 10 times, the market was up. 5 out of the 10 times, the market was down. In fact, during the 35-day shutdown in 2018, the market was actually up about 10%. During the 5 up periods, the market gained an average of 0.4%. During the down periods, the market lost an average of 0.5%.

If I take those averages in the aggregate, it seems to me the market is looking past the shutdown to what else is going on in the financial world. In other words, the market doesn’t seem to care much one way or the other. Before we get in to a big debate about this particular shutdown, let’s remember the words of Sir John Templeton…..”The four most dangerous words in investing are “It’s different this time””.

Please remember, I’m only referring to how it affects the markets. Half of you will, correctly, argue that it damages those that can least afford it. Half of you will, correctly, argue that government tends to do more damage than good, and a shutdown is a net positive. Those are arguments I will acknowledge but am discounting for this particular discussion.

So where are we today? We are almost fully invested (up to your individual risk tolerance), and have been since spring. That won’t change until we hit a sell signal. I’m happy to tell you we aren’t that far away, but we’re not there yet.

We’ll do our best to keep you informed.

Thanks as always for your confidence and patience.