Finance

How Will the Current Shutdown Affect the S&P 500? What History Reveals

The U.S. government’s shutdown, now in its fourth week, impacts workers but the S&P 500 remains stable, unlike historical patterns.

byAndres Castro

October 24, 2025, 12:26 PM

A sign in Battery Park, New York, announcing a government shutdown and Statue of Liberty closure.

A sign informs tourists of a government shutdown in New York. By rblfmr / Shutterstock.com.

Executive Summary

The current government shutdown is the second-longest in U.S. history, impacting approximately 900,000 federal workers without pay, yet the S&P 500 index has remained largely stable.

Historically, the stock market’s performance during government shutdowns has shown no consistent pattern, though most shutdowns occurring after 1990 have been associated with market gains.

The stock market has generally performed well in the periods immediately following previous government shutdowns, with significant gains observed after events like the 2018-2019 shutdown during President Donald Trump’s administration.

The Story So Far

The U.S. government is in its second-longest shutdown, now in its fourth week, which is impacting federal workers and services. Historically, the stock market has shown no consistent decline during shutdowns, often remaining stable or even gaining, and has generally performed well in the periods immediately following their resolution, as seen after the longest shutdown under President Donald Trump’s administration. However, the current economic landscape includes unique factors such as high tariffs, trade tensions, and inflation concerns, alongside expectations for falling interest rates.

Why This Matters

The prolonged government shutdown is inflicting significant financial hardship on nearly a million federal workers and disrupting essential services, yet the S&P 500 has remained largely stable during this period. Historically, the stock market has often shown resilience during shutdowns and experienced gains in the immediate aftermath, including significant rallies after previous shutdowns under President Donald Trump and President Bill Clinton; however, the current unique economic climate of tariffs, trade tensions, and inflation introduces uncertainty regarding whether these historical market trends will hold.

Who Thinks What?

The S&P 500 index has remained largely stable since the current government shutdown began, showing oscillations but no significant overall decline.

Historically, the stock market has shown no consistent pattern during government shutdowns, with most occurring after 1990 associated with market gains, and generally performing well in the periods immediately following shutdowns, as seen after those under President Donald Trump and President Bill Clinton.

The current shutdown’s unique economic context, marked by high tariffs, trade tensions, and inflation, but also potential positive impetus from falling interest rates, suggests that historical trends offer no guarantees for future stock market performance.

The U.S. government has entered its fourth week of a shutdown, marking it as the second-longest in American history and impacting approximately 900,000 federal workers who are not receiving paychecks or essential services. Despite the ongoing disruption, the benchmark S&P 500 index has remained largely stable since the shutdown began on October 1, showing oscillations but no significant overall decline.

Impact on Federal Workers

The prolonged shutdown has led to significant hardship for nearly a million federal employees, many of whom have been furloughed without pay. This situation has also disrupted various government services, affecting individuals relying on them.

As of the article’s writing, the shutdown has surpassed three weeks, causing financial strain for those directly impacted.

Historical Market Performance During Shutdowns

Historically, the stock market’s performance during government shutdowns has shown no consistent pattern. According to research from The Motley Fool, over 20 federal shutdowns and funding gaps between 1976 and 2020 have seen market reactions ranging from a 4.4% loss to a 10.3% gain.

However, most shutdowns occurring after 1990 have been associated with market gains while they were ongoing.

Market Performance After Shutdowns

Data from CNBC.com and Morningstar suggests that the stock market has generally performed well in the periods immediately following the end of previous government shutdowns. For instance, after the longest shutdown on record, from December 22, 2018, to January 25, 2019, which occurred during President Donald Trump’s administration, the S&P 500 index gained 18% within the first 100 days and an impressive 36% a year later.

Similarly, following the third-longest shutdown, from December 16, 1995, to January 6, 1996, under President Bill Clinton, the stock market saw a 6.2% gain in the first 100 days and a 26% increase within the first year.

However, this trend is not universal. A year after a three-day shutdown in January 2018, also during the Trump presidency, the S&P 500 was down 3%. Additionally, after a four-day shutdown in November 1981, the S&P 500 declined by 5.5% in the subsequent 100 days.

Current Economic Context

The current shutdown is unfolding amidst a complex economic landscape characterized by high tariffs, trade tensions, and broader concerns about inflation and the job market. These unique circumstances differentiate it from previous shutdowns.

Conversely, expectations for continued falling interest rates could provide a positive impetus for the stock market, as lower borrowing costs typically benefit both companies and consumers.

Outlook

While historical data offers some encouraging insights into potential stock market behavior post-shutdown, there are no guarantees. Each shutdown occurs under distinct economic and political conditions, and the stock market remains inherently volatile.