MOUNT VERNON — Does a government shutdown, even one that was predicted in advance, have any adverse effects on the United States stock markets? Should investors sell their stocks or hang onto their assets?
To find out, the News sought advice from Philip Glandon, Ph.D., assistant professor of economics at Kenyon College and Robert Roller, Ph.D., dean and professor of management at Mount Vernon Nazarene University’s Jetter School of Business.
Concerning the effect a shutdown might have on the stability of the markets, Glandon said, “These political standoffs are a source of uncertainty and people generally do not like uncertainty, especially when it comes to investment returns. But that’s already baked into current stock prices. You may see more ups and downs in the coming weeks as politicians work through a solution.”
“Investors don’t like uncertainty,” said Roller. “Uncertainly, especially over the last couple of years, has been a very big driver of the ups and downs in the market. In the short run, the stock market reacts negatively to uncertainty, and the government shutdown — because people don’t know how long it’s going to last and what kind of impact it will have — that does introduce some uncertainty into the market. It’s not likely to be good for the market in the short term.”
Both Roller and Glandon would encourage investors to ignore the ups and downs as much as possible.
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