Shutdown

In September of 1995 House Speaker Gingrich, who had swept into office with a passel of Republicans promising to put America’s house back in order by limiting deficit spending, balked at Clinton’s attempt to raise the debt ceiling.  With no budget, the government began operating under a short-term “continuing resolution” until one could be passed.  By mid-November, when that didn’t happen despite bipartisan efforts headed up by Vice-President Al Gore, Senate Majority Leader Bob Dole and House Majority Leader Dick Armey, “non-essential” services were shut down for a few days and workers furloughed.  They were eventually paid about $400 million for not working according to the Clinton administration.  A temporary spending bill was passed but with no permanent resolution forthcoming, a second shutdown began mid-December.  It was resolved with the passage of a budget in early January, 1996.  During the melee, Clinton’s popularity plummeted but Dole and Gingrich were at loggerheads with each other in the ensuing presidential primary.  Clinton eventually won reelection.

How did the stock market react to all this uncertainty?  I was working with many of you back then and you may recall the unsettled tenor of the times as we navigated our investments through troubled waters.  There were frequent fluctuations with charts and portfolio values seesawing back and forth.  Despite the headline confusion however, the markets generally would inhabit a trading range, moving up and down in a narrow two to three percent band before suddenly climbing, establishing another area of consolidation at new higher levels.

That was then, of course.  Are things very different today?  Certainly the names have changed even though the roles being played seem a mere reprise.  I won’t pretend to know how this entire issue will be resolved, but so far the market behavior seems similar.  Prices overall advance, then consolidate in a narrow range.  The parameters are just a little wider between highs and lows and the higher level of prices overall makes the volatility seem more pronounced, but the similarities exist nonetheless.  Let’s hope the final resolution is the same, with markets advancing after a budget is finally passed.  Naturally, as is often said in the investment industry, past performance is no guarantee of future results.  That warning is possibly more aptly applied to Congress.