With Congress showing no sign of consensus, the government shutdown is instilling fear and unease among those from Main Street to Wall Street. Financial advisors are no exception. Heres how advisors and industry experts are reacting to the fiscal standoff.
1. We anticipate that the market will react quite negatively to a government shutdown. We also see the market recovering all of its losses quickly, should a compromise be reached within the next three weeks. After the last government shutdown in 1996, the market rebounded over 10% in the month that followed. We are not doing anything right now. Should the government shutdown become protracted and threaten to precipitate a recession, we are also preparing to sell our equity positions. We do our best to preempt our clients questions, so we sent them an email last week warning them that a government shutdown was imminent and that the market would probably have a lot of downside. We told them that we do expect a compromise at some point and that we believe the market will rebound quickly after that. We told our clients that we are worried about it so that they don't have to be.
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