Good Evening Everybody
I have received quite a few messages in regards to how the government shutdown will impact the TSP and the market. As we know, TSP performance is largely dependent on the US stock markets. It is my opinion that there will be minimal negative market impact.
Going back 20 years, we have had three shutdowns:
- Sept-30 to Oct-17, 2013
- Dec-15 1995 to Jan-6, 1996
- Nov-14 to Nov-19, 1995
The 2013 shutdown witnessed a slight hiccup in the markets, although it is not known if this was indeed triggered by the shutdown. The markets rallied the rest of the year, resulting in my conclusion that the 2013 shutdown had little impact on the stock markets. The “background action” included a strong, uptrending stock market. See chart:
It should be noted that the 1995/1996 shutdown witnessed the NASDAQ (flashback to AOL, NetScape, AskJeeves) bull market in it’s infancy, and had absolutely no negative impact to the markets. See chart:
Like today, these shutdowns were due to the inability to reach agreements, and like today, in the “background” existed a strong and healthy stock market.
As we sit today, 2018, the market is arguably healthier than it has ever been. We are arriving to another shutdown scenario, however based on historical behavior (nothing is guaranteed, but history tends to repeat…), and the strong market in the background, I expect minimal negative market impact. Note that Monday and Friday tend to be “emotional days”, we may see some panic selling, the world-is-ending, action on Monday. It is my opinion that this should be disregarded (if it even happens) and instead let’s allow the market to find its footing later in the week.
Please anticipate another post at the end of the month, or early February, discussing January 2018 market action, as the markets “set the tone” for the rest of the year. All the stock funds are doing well, we are very fortunate. If your choice is international exposure, domestic large caps, or domestic small caps, whatever your preference, you are being rewarded. The year has begun very well.
Thank you and take care
-Bill Pritchard
