The Government Is Shutting Down -- and I Feel Fine

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

I'm a long-term investor, so I really ought to know better by now. Whenever I make a short-term market prediction, the market ends up making a monkey out of me -- and that's the way the day is shaping up so far.

Yesterday afternoon, I wrote that today would produce another day of losses, based on two assumptions:

  • Monday's closing prices reflect overoptimistic investor expectations that a "down-to-wire" agreement announced before tomorrow's market open is still a genuine possibility.
  • No agreement materializes.

I was right on the second one, but I was manifestly wrong on the first, as equity markets worldwide appear to have responded to news of the shutdown with a collective shrug of the shoulders. In Asia, Japanese and Chinese equities were up on the day, and two of the three major European equity markets (France and Germany) are also ahead.

Finally, back in the U.S., which bears the brunt of the economic impact of a shutdown, stocks opened higher this morning, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average up 0.33% and 0.05%, respectively, at 10:05 a.m. EDT. Apparently, the market had priced in a shutdown -- that stuff about markets being efficient isn't all bunk.

The shutdown could have at least one highly visible consequence for market participants (not to mention financial journalists): The New York Times' Economix blog reports that, should it last for more than a day or two, it's unlikely that the Bureau of Labor Statistics will publish its employment report for September this coming Friday. The reports, which are released on the first Friday of each month, contain arguably the most important and widely followed economic data on the planet -- particularly at a time when the Federal Reserve has set explicit benchmarks for the unemployment rate with regard to its policymaking.

Despite the damning assessment of our dysfunctional polity, it's worth remembering that, to paraphrase Calvin Coolidge, the business of America -- i.e., business -- continues, even when parts of the government shutdown. Entrepreneurial energy and sound business fundamentals can still translate into growth and value creation, and individual investors can participate in that process.

Next week, you could own a piece of the Empire State building, for example; the REIT that owns this iconic asset is about to go public. Potbelly, a sandwich chain that I have known since my days in Chicago roughly a decade ago, is also set to sell shares for the first time next week. And let's not forget Twitter's highly anticipated IPO, which reportedly could take place as early as the end of October or the beginning of November.

My point is not that you ought to rush out and buy these offerings, but rather that business goes on and that, despite the deluge of headlines, the government shutdown will have essentially zero effect on long-term business values. Investors are better off whittling away their time by simply participating in long-term growth stories than worrying about today's hand-wringing headlines.

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Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on Twitter @longrunreturns. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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