Investors are unfazed about the government shutdown. Here’s how stocks have fared during previous closures.

Stocks closed at record highs on Wednesday despite the looming U.S. government shutdown, which is expected to impact hundreds of thousands of workers and federal agencies. The fact that investors seem unfazed by this news may be surprising, but historical data suggests that government shutdowns have a modest impact on financial markets and the broader economy, especially if they are short-lived.

According to Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, most economic activity that is delayed during a shutdown is usually made up shortly after it ends. This is why he believes that the current shutdown will not be terribly disruptive for the equity markets. Over the past 22 shutdowns that the U.S. has experienced since 1976, the S&P 500 has actually risen during some closures and fallen during others. On average, the stock index gained 0.3% during these episodes and jumped 13% on average in the 12 months following the shutdowns.

During the longest shutdown in U.S. history, which occurred from December 2018 to January 2019, around 800,000 federal workers were furloughed or worked without pay. While this put many employees under financial pressure, the impact on the overall U.S. economy was minimal. Consumption across the country did dip during the shutdown, but quickly recovered once the government reopened.

Despite concerns about the current shutdown potentially lasting longer than previous ones, Wall Street remained optimistic on Wednesday. The S&P 500 closed up 0.3%, reaching a new all-time high, while the Dow Jones Industrial Average also finished at a record high.

However, there are still uncertainties surrounding the current shutdown that could impact investor confidence. With new tariffs announced last week and ongoing political tensions, market uncertainty is on the rise. If the shutdown drags on for an extended period, companies may delay investment and hiring decisions, which could have a negative impact on stock prices.

Furthermore, the halt in economic reports during the shutdown could also unsettle investors. Without critical data to assess various economic indicators, investors may feel like they are “flying blind,” as noted by Vital Knowledge market analyst Adam Crisafulli.

In conclusion, while historical data suggests that government shutdowns have a limited impact on financial markets, the current political dynamics and uncertainties surrounding the shutdown could potentially shake investor confidence in the long run. It will be important to monitor how events unfold in the coming days and weeks to gauge the true impact of the shutdown on the economy and the stock market.