The federal government is again facing the prospect of a partial shutdown.
If Congress does not meet a January 30 deadline to reach a budget agreement, some nonessential government operations could shut down temporarily. However, essential services such as Social Security payments, Medicare/Medicaid, federal law enforcement, and air traffic control would continue uninterrupted.
How common are government shutdowns?
Shutdowns are hardly a rarity. Since the first in 1981, the government has been forced to shut down 11 times. History shows these shutdowns have ranged from very brief to more prolonged, but even the longer ones have had limited market impact.
How might a possible government shutdown affect stocks this time?
Past shutdowns have had little impact on investors, consumers, or financial markets. “Even longer historical shutdowns, which were disruptive and costly, did not move the stock market,” says Jurrien Timmer, Fidelity's director of global macro.
Timmer’s belief that shutdowns are not significant events for stocks is based on analyzing historical data about the performance of the S&P 500® Index during the 100 days before and after the 2013 and 2018 shutdowns. In both cases, stocks rose strongly in the 100 days following the shutdowns of nonessential government services.
Timmer also points out that the 2018 shutdown took place when stocks were nearing the tail end of what he calls an “unrelated 20% drawdown” and began a strong rally while the government was still on hiatus. And though past performance is never a guarantee of future results, US stocks generally rose over the course of the October to November 2025 shutdown.
What this history shows is that market participants understand that short-lived political maneuvering may make headlines, but typically does not have a meaningful impact on corporate earnings, which are the primary drivers of stock prices. That's especially true for news events such as a shutdown where the eventual outcome is predictable. As Timmer puts it, "We've all seen this movie before and it always ends the same way."
S&P 500 performance around 2013 and 2018 shutdowns
Will a government shutdown affect the economy?
While history shows that government shutdowns have had little long-term effect on stock prices—or on the size and functioning of the federal government—they can have a potential economic impact if they drag on.
The federal government spends enormous amounts of money buying goods, providing services, and otherwise generating economic activity. If a shutdown does occur and lasts for more than a short period, it could temporarily weigh on economic activity—primarily through reduced government spending and lower confidence among consumers and businesses.
For example, the 2025 government shutdown likely reduced US economic activity in the fourth quarter of 2025, though most estimates indicate that growth in gross domestic product (GDP) stayed positive despite the temporary drag.
How could a shutdown affect government services?
A shutdown would cause an interruption of some government services but not all. Social Security, Medicaid, and Medicare payments to recipients would not be affected. Neither would what are called essential services such as federal law enforcement, air traffic control, and disaster relief. The US Postal Service would also not be affected.
Should you worry about your investments if there is a shutdown?
While uncertainty about if and when the government might shut down can generate worrisome headlines, the biggest risk for most investors may be the temptation to overreact to those headlines and make personal finance decisions based on fear and uncertainty.
If you already have an investment strategy built around your goals, financial situation, time horizon, and risk tolerance, you likely don't need to make any changes in response to headlines. If you don't, learn more about how we can work together to help you create one.