Nearly 1 Week Into the Government Shutdown, What's It Mean to You?
Now that the federal government has been shut down since Tuesday, are we beginning to see any impact on the economy in general? What about GDP, or the Federal Reserve's outlook on scaling down its bond-buying program? And perhaps most importantly for us Fools, what does it all mean for investors?
While I can't give you exact numbers -- and I doubt anyone can -- we do know that the Dow Jones Industrial Average lost 185 points, or 1.21%, last week. But can we attribute that drop to the shutdown? After all, the S&P 500 index lost a mere 0.07% during the past five trading days -- and the Nasdaq actually rose 26 points, or 0.69%. So far, investors don't seem to be getting too worked up over what's going on.
Furthermore, history shows that economists just aren't very good at estimating things like GDP rates, unemployment figures, or Fed tapering actions. So when you see an article telling you to brace for doom and gloom, just remember that those types of predictions tend to be notoriously wrong.
What we do know is that consumer-goods stocks may not see a drop in demand, thanks to a bill the House passed yesterday to provide back pay once the shutdown ends for the 800,000 federal workers who are currently furloughed. Now instead of toughing it out at home, we may see some of those workers and their families head to the malls.
But others may still lose a paycheck because of the shutdown, including private-sector workers whose companies contract with the government. United Technologies' Sikorsky Aircraft subsidiary, which makes Black Hawk helicopters, just today reversed a decision to furlough 2,000 workers, after the Pentagon moved to bring most of its own furloughed employees back to work. That means the defense inspectors Sikorsky relies on will be back on the job. Without them, Sikorsky couldn't have moved forward with production.
That reversal is a reminder that it's difficult to predict how everything will ultimately be affected by the shutdown. Rushing to sell your shares of Procter & Gamble or Wal-Mart -- simply because someone says GDP is expected to fall, or hundreds of thousands of workers won't be getting a paycheck next week -- would be a really small-"f" foolish thing to do.
Here at the Fool, we focus on the long term. Even if some businesses take a hit from the shutdown, this is a short-term problem, not a long-term issue damaging those businesses. If anything, take this opportunity to watch for stock-price dips and buy into some solid companies that other investors are selling because of their shortsightedness.
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The article Nearly 1 Week Into the Government Shutdown, What's It Mean to You? originally appeared on Fool.com.Fool contributor Matt Thalman has no position in any stocks mentioned. Check back Monday through Friday as Matt explains what caused the Dow's winners and losers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter: @mthalman5513. The Motley Fool recommends Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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