🍂Fall – Fell – Fallen. S&P500 Technical Perspectives over Q3'23The US government is well on its way to going into lockdown and shutting down the economy as policymakers are deadlocked over the national budget for the next fiscal year.
While leading stock market strategists are not yet terribly concerned about such perspectives, and entertain hopes that investors have a high probability of "getting away with it" with strong performance, in reality the facts tell a different story.
S&P500 SP:SPX is suffering losses, and has already lost about half of its annual growth since the beginning of 2023, and the Nasdaq-100 index NASDAQ:NDX reduced 2023 growth approximately by 30 percent.
To avoid a shutdown, Congress needs to pass all 12 spending bills for the next fiscal year by Sept. 30, something it has historically done rather poorly.
This could create problems for the market, which could immediately, that is, on the same day, be seriously affected by a US Government shutdown, considering SPX seasonality where September is one of the worst calendar month for investments into S&P500.
S&P500 Seasonality Chart
Meanwhile historical back test analysis says, in the past 20 government shutdowns, the S&P 500 stayed relatively flat, with the benchmark index losing an average 0.4% the week before a shutdown and gaining .1% by the end of a shutdown, according to a Reuters analysis of CFRA Research data.
And in some cases, stocks actually ended the shutdown period higher, with the market gaining a net 10% following the 2018-19 shutdown, according to Renaissance Macro.
Shutdowns lasting five days or more have also been known to see a quick market rebound, according to a 2021 Dow Jones analysis. On average, the S&P 500 had already moved into positive territory within one month of the shutdown. Shutdowns themselves are also relatively short. The last government shutdown, which was the longest-ever, lasted for 35 days.
Anyway everything could happened. To stay away, or look beyond the market's twists and turns in the weeks before, during, and immediately following a potential shutdown - this is could be very, very individual investment decision.
Technical pictures illustrates that weekly SMA(52) - 12 months simple moving average near 4150/4200 pp in SP:SPX or Dec'23 Futures CME_MINI:ESZ2023 (depends what are you looking for) could be quite strong support in any cases.
