The U.S. congressional standoff that shut down the government for the first time in 17 years is a buying opportunity for stock investors, if history is any guide.
The Standard & Poor’s 500 Index (SPX) has risen 11 percent on average in the 12 months following a government shutdown, according to data compiled by Bloomberg on instances since 1976. That compares with an average return of 9 percent over 12 months. In all the cases, the U.S. equity benchmark was higher by the end of the next two years.
While the S&P 500 has fallen seven of the past eight days on concern the political deadlock over the U.S. budget and debt limit will hurt the economy, investors at Raymond James & Associates and PNC Wealth Management say equities will recover as profits rise. Analysts’ forecasts show earnings will increase at the fastest pace in two years during the fourth quarter. More than 300 companies in the S&P 500 are scheduled to report results this month, according to data compiled by Bloomberg.
“I’m a buyer on weakness,” Jeff Saut, the St. Petersburg, Florida-based chief investment strategist at Raymond James, said in a phone interview. He helps oversee about $400 billion. “Once it’s in the rearview mirror along with the debt ceiling, the market will start to focus again on the improving economic numbers and improving earnings.”