Market Shrugs at Government Shutdowns, Sam Stovall Says

Historically, the S&P 500 has been flat when federal functions grind to a halt, and the index is up 7.5% since the latest closure.

With parts of the federal government closed amid a test of wills in Washington, some investors fear that the stock market will suffer. Maybe. But history suggests otherwise, according to Sam Stovall, chief investment strategist at CFRA.

The S&P 500 “essentially went nowhere” during the 20 shutdowns since the mid-1970s, Stovall wrote in a research note. The current closure, now in its 20th day, hasn’t harmed stocks, at least thus far.

In fact, the benchmark stock index is up since the shutdown started, the result of a tiff between Donald Trump and congressional Democrats over the president’s proposed $5.7 billion border wall with Mexico.

The shutdowns over the past four decades “have had a greater impact on headlines than they have on bottom lines,” Stovall declared.

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The first full day of the shutdown was Sunday, December 23, and stock prices tumbled on Monday, Christmas Eve day. The catalysts for that were many, however, including the trade war with China and leeriness that the Federal Reserve would keep hiking interest rates. And indeed, that slide was actually a continuation of the downtrend that began back in October.

After Christmas, stocks have generally moved higher, amid optimism about China and the Fed. From the close at the last trading day before the shutdown, on Friday, December 21, to this Thursday’s close, the S&P 500 is up almost 7.5%. By Stovall’s estimation, that is the best shutdown return ever.

The shutdowns lasted an average of seven calendar days, with the shortest at one day and the longest (in the mid-1990s) at 21, Stovall indicated. The worst S&P shutdown performance was in 1979, when it dropped a mere 3.9%.

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Texas Teachers’ Closes Out Year with $1.8 Billion in New Commitments Across 12+ Strategies

Commitments primarily focused on real estate and infrastructure.

The Texas Teachers’ Retirement System (TRS) approved over $1.8 billion in commitments to more than a dozen strategies during December, a recently issued report from the pension revealed.

A majority of the capital committed was allocated towards vehicles that primarily focus on real assets investments, such as infrastructure, real estate, and energy. However, private equity vehicles with large buyout strategies received some attention from the $154 billion investor.

Sweden-based EQT received the most capital from TRS, clocking in $450 million across three strategies. The new EQT Infrastructure IV fund, which is aspiring to raise about $9 billion in capital, received $200 million from TRS. Subsequently, two real estate strategies, EQT Real Estate II and a co-investment vehicle, received $100 million and $150 million, respectively.

The investor also deposited a significant amount of capital into Alamo L.P., a separately managed account hosted by KKR that invests in several  asset classes. The SMA received contributions for its infrastructure ($100 million), large buyout private equity ($225 million), and opportunistic real assets ($13.9 million) strategies.

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The remainder of the institutional investors’ December 2018 activity is summarized below:

TRS is currently at 76.9% funded, and it is projected to take 31 years for TRS to reach 80% funded.

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