The Bigger Picture, Proven History, and the Effects of Government Shutdowns
Market Commentary

The Markets

Markets were resilient. Investors have had a lot to process – geopolitics, inflation, and consumer sentiment. But investors were reassured when earnings season kicked off with reports showing major banks posted stronger-than-expected profits during the third quarter. Here’s a brief look at what’s happened recently:

Sometimes, in the midst of uncertainty, it’s helpful to take a step back and look at the bigger picture. Consider the historical performance of the Standard & Poor’s (S&P) 500 Index. The current version of the Index debuted in 1957. That year, its average closing price was 44.42. Recently, the Index closed at 4,224.16.

The S&P 500 didn’t travel in a straight line; a lot happened over that 66-year period. The United States experienced 10 recessions. The world witnessed dozens of wars, uprisings, and regime changes. The Berlin Wall was built and torn down. As Americans we experienced hurricanes, the global financial crisis, the dot com meltdown, 9/11, the COVID-19 pandemic, and so much more.

Some events roiled financial markets while others had little effect. When events have led to the S&P 500 losing value, the Index recovers, and believe it or not it did every time. Sometimes it recovered quickly, sometimes it took more time but once again adjustments can be made and then we practice patience once more. It’s not often easy but it works.

Again, if world events and the news shows are getting you more stressed out than helping, consider reducing your screen time. It’s often said you are what you think. If music or old movies make you happy, increase that part of your life. It works and you deserve it.

I look to adjust in positive ways when times are tough. Falling share prices can create opportunities to do tax loss harvesting to embed tax write-offs in your personal accounts. Our income options are realizing 5% or better, so we have a place to make money with the portions that are out of the market.

Please let me know if you’d like a personal update, as I always enjoy our calls.

 

 

The Effects of a Government Shutdown

One event that did not make the September Investopedia survey’s list of investor worries was the possibility of a government shutdown.

To date, Congress has failed to approve funding for the discretionary spending portion of the fiscal 2024 U.S. budget. Temporary spending is in place until mid-November.

When the government shuts down, “…many federal employees are told not to report for work, though under a 2019 law, they get paid retroactively when the shutdown ends. Government employees who provide essential services, such as air traffic control and law enforcement, continue to work but don’t get paid until Congress takes action to end the shutdown.

“Benefits such as Social Security and Medicare continue to flow because they are authorized by Congress in laws that do not need annual approval (although the services offered by Social Security benefit offices may be limited during a shutdown). In addition, the Treasury can continue to pay interest on U.S. Treasury debt on time.

The good news is shutdowns tend to have little effect on U.S. stocks. Since 1976, there have been 20 government shutdowns. The S&P 500 Index lost value nine times and gained value 10 times. One shutdown lasted only a few hours and didn’t have much effect on the market. The bad news is government shutdowns can temporarily slow economic growth and create a lot of worry.

Focus – Think About It

Fear is the most contagious disease you can imagine. It makes the virus look like a piker.

Warren Buffet

Investor and Philanthropist

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Sources

https://www.investopedia.com/investors-grow-more-fearful-amid-high-rates-and-political-uncertainty-8346786

https://www.cnn.com/2023/10/13/investing/premarket-stocks-trading-defensive-assets-war/index.html

https://www.macrotrends.net/2324/sp-500-historical-chart-data

https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions

https://www.nasdaq.com/articles/a-short-history-of-the-great-recession# (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/10-23-23_Barrons_Data_5.pdf)

https://www.barrons.com/market-data (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/10-23-23_Barrons_Stocks%20Continue%20Falling%20Following%20Powell%20Remarks_6.pdf)

https://www.barrons.com/livecoverage/stock-market-today-102023/card/stocks-continue-falling-following-powell-remarks-AcNKHjXphXTuytE76eUq

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202310 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/10-23-23_Bloomberg_Trump%20Ally%20Jordan%20Loses%20Third%20Speaker%20Vote_8.pdf)

https://www.bloomberg.com/news/articles/2023-10-20/jordan-seeks-another-speaker-vote-despite-fierce-opposition

https://www.brookings.edu/articles/what-is-a-government-shutdown-and-why-are-we-likely-to-have-another-one/

https://www.cnn.com/2023/09/28/investing/premarket-stocks-trading-government-shutdown/index.html

https://www.goldmansachs.com/intelligence/pages/the-cost-of-a-us-government-shutdown.html

https://money.usnews.com/investing/articles/8-best-warren-buffett-quotes-of-all-time

Disclaimers

* These financial views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter is partially based on one prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
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* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
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* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
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* Consult your financial professional before making any investment decision.