Would a government shutdown hurt stocks?

Time’s running out for lawmakers to seal a funding deal to avert a government shutdown.

The odds of Congress letting the U.S. run out of cash and forcing it to close for the first time since 2013 are “low,” says Chris Gaffney, president of EverBank World Markets. But it still bears watching as a surprise could rattle investors, he says, at a time when stocks are pricey relative to earnings. The current spending bill expires at 12:01 a.m. Saturday.

Congress basically has three options, according to a Citigroup report. Pass a large spending bill that both parties agree on, move forward with a short-term fix that would keep spending levels at current levels and keep the government running through September, or nix a deal, which would set in motion the shutdown of “non-essential” government functions. In 2013 during the 16-day shutdown, national parks were closed and many government workers temporarily had no job to go to.

But what if investor optimism is misguided and Congress can’t strike a deal? Will stocks tank?

History says Wall Street will survive and look past any temporary disruption caused by the federal government closing due to a lack of funds. In the 18 previous government shutdowns, which lasted from one to 21 days, the Standard & Poor’s 500 stock index posted an average loss of 0.6% and suffered losses 56% of the time. The biggest decline: a 4.4% drop during an 11-day shutdown in the fall of 1979.

Forget France, it’s Congress Americans fear

While government shutdowns tend to cause market swings to increase, they never have posed a threat to bull markets. Stocks actually rose 3.1% during the 16-day shutdown in 2013 when Congress sparred over how much to increase the amount of cash the government can borrow.