Wall Street Crack

For Those Addicted to the Wall Street Game

Government Shutdown Looms. What will the market do? $SPY

Posted by Dino on April 8, 2011

As the 2 sides bicker back and forth over a few billion dollars, it appears that we are destined for the US Federal Government business to come to a halt.  Regardless of who is at fault, millions of Americans will be affected.  What will the market do?  How will it be affected?  The only thing we can do is take a look at past shut downs to give us an idea of what may take place.

In 1995 & 1996 a Democratic President fought with a Republican controlled Congress over the federal budget resulting in 2 shutdowns from November 14 through November 18, 1995 and December 16, 1195 through January 6, 1996. The only difference between the participants then and now is that the Republicans controlled both the Senate and the House and today, the Democrats control the Senate and the Republicans control the House.

The SPY was still in its infancy and only traded about 100k-300k shares per day.  This is minuscule when compared to todays average of  176 million shares per day but it gives us a decent representation of what was taking place.   As you can see, back then the shut down didn’t appear to have much affect at all on the day-to-day trading of the markets.  Lets hope this shut down has little bearing on trading next week.

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