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How Does the Government Shutdown Impact My Portfolio?

As a financial planner I get quite a few e-mails each day from various professional journals and online financial blogs, most of which get a quick scan, and then very quickly placed in my delete folder. Over the past few days I have been amused with several messages asking how the government shutdown will impact investors, or impact advisors. I am amused because to me, and I suspect many of our clients, the answer seems so obvious (no impact of course), but that answer may not be so obvious to a large number of investors.

Why do I say there is/will be no impact on portfolios? Because whatever the news-du-jour may be, the short-term fluctuations of the market are meaningless for the long-term investor. And if you are in the stock market, chances you have invested for the long-term. (You are invested for the long-term?) Hence, if the expectations and reality of the government shutdown cause the market to lose 5%, or even 10% of its value during the course of 1-2 weeks, the reality is that the market will likely rebound to its previous state when the headlines change to the latest celebrity faux pas. For those of us with written investment policy statements, we have designed our portfolios to withstand the short-term fluctuations of the market. In fact, if markets fall enough, we know to rebalance our portfolios so we can buy stocks at a discount!

Hence, I recommend that you follow this shutdown news with a bit of humor as it relates to the investment markets. Of course, for those directly impacted by the shutdown who may be temporarily out of work, this is a much more serious issue. That is something that is newsworthy. But how it impacts your portfolio? Probably not worth wasting too much mental energy.

What about the 'looming' debt ceiling issue? We are scheduled to hit the debt ceiling on October 17th and the last time we came close to default the markets did become much more volatile. Well, we certainly could see a repeat of August 2011 when we had our last man-made Congressional debt ceiling crisis. But here again, while the short-term volatility could be much more significant than the impact of a government shutdown, that too is likely to be short-term in nature. All of these invented crises need to be kept in perspective if you are a long-term investor. 

Best advice: turn off the news! Better to enjoy the beautiful fall weather, read a good book, or spend time with family and friends. And if you do not have a written investment policy statement that will help you weather the inevitable market storms, feel free to reach out to us so you too can sleep well at night.

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