What US Government Shutdowns Teach Us About Staying Invested

Alpesh Patel
Oct 8
4 min read

Why Long-Term Investors Should Tune Out the Noise

Every few years, the same drama unfolds in Washington: political deadlock, last-minute negotiations, and talk of a “government shutdown.” The headlines sound apocalyptic - images of closed federal offices, unpaid workers, and uncertainty ripple through the media.

Yet, if you’re an investor, particularly one focused on building long-term wealth or a pension, the story beneath those headlines is surprisingly calm.

Let’s look at the data.

The Truth About Market Reactions During Government Shutdowns

The first chart, from Bloomberg and Truist Advisory Services, tracks S&P 500 returns during every US government shutdown since 1976.

The takeaway is remarkably consistent: The S&P 500 has risen and fallen almost equally during these events — with an overall average return close to zero, even slightly positive when outliers are removed.

That means, historically, a shutdown has had little to no lasting effect on market performance.

The second chart, from Chartr and USAFacts, shows the duration of every US shutdown since 1976 - from brief 1-day standoffs to the record 34-day shutdown that ended in January 2019.

Despite all that political theatre, the market marched on.

In fact:

During the 1995–96 shutdown (lasting 21 days), the S&P 500 barely moved — and then surged more than 20% in the following 12 months.
During the 2013 shutdown (16 days), the S&P 500 gained over 30% for the year.
Even the longest shutdown in history (2018–2019, 34 days) coincided with a temporary dip — followed by one of the strongest recoveries in the market’s history.

The data proves what experience tells us: Government shutdowns shake confidence, not fundamentals.

The Real Risk: Emotional Investing

Markets react to uncertainty but investors overreact to fear. A shutdown is rarely about economics; it’s about politics. Federal spending may pause, but companies don’t stop producing, selling, or innovating. Apple doesn’t halt iPhone sales. Microsoft doesn’t stop generating cloud revenue. McDonald’s doesn’t close its restaurants.

The stock market, meanwhile, is a voting machine in the short term - but a weighing machine in the long term.What gets “voted on” during a shutdown is fear. What gets “weighed” over time is profit, productivity, and progress.

And over time, those always win. If you panic and sell every time there’s political noise, you’re not managing risk - you’re manufacturing it.

The Cost of Missing the Market’s Best Days

This is the real danger. A 2023 Schwab study showed that missing just 10 of the market’s best trading days over 20 years can cut your total returns by more than half. The problem? Many of those “best days” occur right after the worst ones; often during crises, shutdowns, or recessions.

That means the moments when you most feel like pulling out are often the times you most need to stay in. This is a lesson I’ve learned not just from research, but from experience. As a hedge fund manager and investor, I’ve seen portfolios soar not because of perfect timing - but because of discipline.It’s not about predicting what happens next. It’s about positioning yourself so that, whatever happens, you benefit from the market’s long-term growth.

Lessons for Pension and Long-Term Investors

If you’re investing for your retirement, you’re not investing for the next shutdown, election, or economic cycle.You’re investing for the next 20, 30, or even 40 years - through many ups and downs, crises and recoveries, governments and policies.

A few key lessons emerge:

Short-term headlines don’t define long-term returns: The S&P 500 has endured government shutdowns, wars, inflation crises, pandemics and yet, over decades, it has delivered roughly 8–10% annualised returns.
Compounding rewards patience: Every time you let fear interrupt your investment journey, you reset your compounding clock. A 1-year break can cost you thousands in lost growth over decades.
Your pension is a marathon, not a sprint: You wouldn’t abandon a marathon at mile 5 because it started raining. Yet many investors abandon their pensions during periods of political or market “rain.”
Focus on ownership, not headlines: Owning shares in the world’s most innovative companies means owning the future. And the future doesn’t hinge on a temporary budget standoff.

Why Campaign for a Million Matters

This is exactly why I launched Campaign for a Million — to help everyday investors build long-term wealth through education, discipline, and data-driven investing.

The idea is simple: To turn £1,000 into £1 million over time by following principles that hedge fund managers and seasoned investors use - but simplified for individual investors.

We teach strategies focused on:

Compounding and time — not speculation.
Owning the best businesses — not chasing the latest fads.
Mindset and patience — because emotion is the biggest risk to your pension.

Government shutdowns, interest rate hikes, election cycles, they’ll all come and go. But your wealth journey doesn’t depend on them. It depends on staying invested through them.

The Bigger Picture

Since 1976, the US has had more than 20 shutdowns - some short, some long, none fatal to markets.The average market reaction? Almost neutral. That’s a powerful reminder.

When you zoom out, markets aren’t reacting to noise they’re reflecting human progress.Innovation continues. Productivity rises. Companies adapt.And investors who stay patient, stay invested, and stay focused - are the ones who win.

Final Thought

Government shutdowns are temporary. Political uncertainty is temporary. Market dips are temporary. But wealth built through disciplined investing is permanent.

So the next time you see a headline warning of another shutdown, don’t panic. Remember what history shows: Markets pause. They wobble. But they move forward.

And so should you.

To learn how to invest smarter and build your own path to long-term financial freedom, visit www.campaignforamillion.com - and start your journey toward making your money work as hard as you do.

Sources:

Bloomberg & Truist Advisory Services, “S&P 500 Returns During US Government Shutdowns” (2023).
USAFacts, “History of US Government Shutdowns Since 1976,” (2024). Visualized by Chartr.
S&P Dow Jones Indices, Historical Performance Database, 1957–2024.
FactSet, “S&P 500 Annual Returns” (2013).
Morningstar, “2019 US Stock Market Year-End Report” (2020).
Charles Schwab, “The Power of Staying Invested: Modern Wealth Survey” (2023).
Warren Buffett, Berkshire Hathaway Shareholder Letters, 1987–2018.

Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Past performance is not indicative of future results. Investments can fall as well as rise, and you may not get back the amount invested. Always seek independent, FCA-authorised advice before making financial decisions.

Alpesh Patel OBE www.campaignforamillion.com