What A US Shutdown Means To You

Uncle_Sam_(pointing_finger)The US government has failed to agree on a federal budget so it has effectively stopped providing all but essential services. The technical term for this is a shutdown, which sound more terminal than it really is.

That’s because since 1976, the US government has shut down on 18 separate occasions. Six of those shutdowns occurred in the 70s; eight happened in the 80s and three in the 90s. There hasn’t been a shutdown since 1995, which was when President Clinton occupied the Whitehouse.

The latest shutdown has been over the Affordable Care Act, otherwise known as Obamacare. The Republicans reckon the country cannot afford to implement affordable care at this time but President Obama said the Act must not be delayed. Hence we have the unedifying impasse.

The media are having a field day over the shutdown but we as investors should try to keep our heads and try to react rationally.

On 16 December 1995, when the US last effected a government shutdown, the Straits Times Index (SGX: ^STI) stood at 2,205 points. Today the index is some 43% higher before dividends are included.  If you add in a generous dollop of dividends you should be looking at a total return of over 100%.

But within the index some companies have done even better over the last 17 years. Jardine Matheson Holdings (SGX: J36) has returned 1,586% over the 17 years, which equates to a compound annual growth rate of 17%. Jardine Strategic Holdings (SGX: J37) has also return 17% a year and Genting Singapore (SGX: G13) has returned 14% annually.

Elsewhere, Dairy Farm Holdings (SGX: D01) is up a mouth-watering 3,070% and shares in Super Group have gone from a dividend-adjusted price of $0.34 to $4.26. That’s an increase of 1,153%.

In times like this it is easy to fall into the trap of panicking along with the naysayers. But remember this: While some parts of America may be closed for business, it is business as usual elsewhere in the world.

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