With the Washington budget drama/comedy/tragedy on the front burner, consider the 1996 situation, when the clock ran out on the federal government’s cash flow. The stock market continued its bull market climb, with perhaps a minor pause around September 30. It was business as usual for the country’s financial sector; it had no problem overcoming the frictions resulting from the spending drop.
While many individuals suffered hardships, suffered lay-offs, or faced a shortened workweek, most everyone escaped the consequences of no money to pay the bills.
The government’s actual halt did not come until November 14; it lasted 34 days, ending finally on January 6.
The diagram shows the S&P500 continuing its move to higher prices early on during that crisis. Though prices slumped for a while, they soon regained these losses. Later on though, between the end of January to mid-March 1997, the market did lose ground – yet that happened far after the shutdown, when government spending had once again resumed.
September 30, 2013 2:23 Eastern
