We are about one week away from a potential US government shutdown. At this point, the House is not in session, and the Senate shows no signs of coming up with a solution.
Most of the time after the political drama, the legislative bodies reach a short-term “non-solution” that extends government funding for three to six months. They essentially just kick the can down the road.
But what if it happens this time? How will it affect your investments? How might it affect the stock market?
The good news is that government shutdowns have not been bad for the stock market.
In the last 50 years, there have been 22 government shutdowns and those shutdowns are typically very brief. After political points have been made and both parties fight to dominate the headlines, the shutdowns end in an average of 8 days. The most common shutdowns last just 2 days.
I am not minimizing the pain and the chaos of government shutdowns as millions of people are impacted. Government shutdowns are scary for government workers and many others who depend on government resources. Our political leaders should never let the government go out of business even temporarily. This post is only about the potential impact on the stock market.
The stock market actually gains an average of 0.3% during government closures. 55% of the time, stock prices go up and 45% of the time stock prices go down slightly. Even in longer government suspensions, stocks have usually performed well. The last shutdown happened during Trump’s first term, and it lasted for 34 days. The stock market gained 10% during that government closure.
Every situation is a little different, however. There has never been a government shutdown when stocks were overvalued by more than 20%. September is usually a tough month for the stock market but prices are up 3% in the current month. With tariff uncertainty and inflation worries and unemployment concerns, no one wants to mess with the current success.
Another comforting statistic is that 12 months after government closures, the stock market has posted gains almost 90% of the time. The average price level one year after the halt is a gain of almost 13%.
There are no guarantees in the stock market particularly in the short term, but history tells us that there is no need for panic as we watch the headlines over the next week.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
The stock market has continued its steady climb since the lows reached on April 8th at the depths of the tariff concerns. The S&P 500 has risen 33% since the low point in April and has climbed about 5% over the last two months. The S&P 500 is now up almost 13% for the year and the Nasdaq is now up about 16% in 2025 – despite the big decline during the tariff announcements.
In the chart below you can see the extreme price volatility in April and the steady move higher over the last four months.
Economic news has been mostly negative over the last month. Inflation has increased slightly over the last two months. Jobs numbers have been weak lately and the unemployment rate is now climbing. Just this week, the Fed decreased interest rates by 0.25% and they indicated that there could be two more rate decreases before the end of the year.
If inflation remains under control, I expect the economy to be fairly resilient. Interest rate cuts will help, and the economy is being carried by two groups that are less affected by a soft labor market – the wealthiest 10% and retirees.
The steady and consistent increases in stock prices are a cause for some concern. My valuation gauge indicates that the stock market (S&P 500) is now 24% above its fair market value in late September. This is higher than we were in January 2022. The last time the market was overvalued by this much was in 2000 during the dot-com bubble.
I do not trade based on market valuation levels and you should not either. It is just a reminder that you need a strategy in place to protect your savings in case we experience a bear market. Older investors in particular need loss protection.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
A major challenge for most people in investing is setting the right goals and expectations. Even the most educated and experienced investors often get this wrong. Without clear, realistic goals, you won’t succeed as an investor.
The process begins with self-awareness—understanding your emotions and attitudes toward investing. You need to know what kind of investor you are emotionally. The second part is educating yourself about the possibilities for investment returns. Once you know both yourself and the range of outcomes, you can set meaningful goals and expectations.
Knowing Yourself
To better understand yourself as an investor, ask these questions:
1. What is your tolerance for short-term losses?Some people can’t tolerate even small, temporary losses—for example, a 5% drop in three months. If that’s you, the stock market isn’t a good fit. Even bonds might feel risky, considering they lost 16% in 2022 and still haven’t fully recovered as of late 2025.
Others recognize that markets are volatile in the short term and are willing to accept even large losses (up to 40%) in exchange for long-term gains. Most people fall somewhere in between, accepting moderate short-term losses for the chance at higher long-term returns.
2. Are you a risk-taker or a speculator?Some investors are drawn to the idea of getting rich quickly. They want to bet big on the “next Amazon, Google, Apple, or Nvidia.” While this approach can pay off, it carries enormous risks.
Speculating—by concentrating heavily in one stock, cryptocurrency, or other high-risk asset—is closer to gambling than true investing. While you might double or triple your money, you could just as easily lose it all.
Speculation has no place in retirement accounts. You can gamble with money you can afford to lose, but not with the money you’ll depend on in retirement.
3. What do you consider good, excellent, or disappointing results?Many investors don’t have a clear idea of what typical returns look like. Before setting expectations, write down your own benchmarks. Ask yourself:
What do I believe are average returns? (3%, 5%, 7%, 12%?)
What would I consider good returns? (7%, 9%, 15%?)
What would I consider excellent returns? (12%, 15%, 20%?)
What would disappoint me? (6%, 3%, or even negative returns?)
Also, consider potential losses. How much could you tolerate losing during a market decline? Write that number down—it’s just as important as your return goals.
The Possible Outcomes
Your initial opinions matter but now let’s look at the typical range of actual results—your reality check.
Average investor: about 5% per year.
Above-average investor (with an advisor): about 7% per year.
Very good investor: 9% or more per year. Some skilled do-it-yourself investors achieve 10–11% annually, even before getting higher returns from my system.
And what about the top professionals? Surprisingly, fewer than 1% of highly paid fund managers beat the S&P 500 consistently over the long run. In my own review of 9,000 funds, only 9 managers outperformed the index over a 20-year period.
While some managers shine for a year or two, very few sustain superior results over decades—the time frame that truly matters for retirement investors. If you’re 65, you need to plan for a 30-year horizon.
Yes, there are rare investing “superstars” who earn 20–30% annually for decades, but they run hedge funds for the ultra-wealthy and have access to opportunities the average investor doesn’t.
So ask yourself honestly: if 99.9% of professionals can’t consistently beat 10% annual returns, what are the odds that you—or your advisor—can?
Losses
Let’s now look at the possible losses that you could experience.
The only thing that can’t lose money is a savings account or a Certificate of Deposit. If the bank fails, you would still be covered by insurance up to a certain amount.
Money market funds technically can post a short-term loss, but it is highly unlikely. Money market funds were underwater for a short period of time in the Financial Crisis of 2008, but they quickly returned to par value.
Bonds can and do lose money in the short-term. Bonds lost about 16% in 2022 and have yet to recover at the end of 2025. If you own individual bonds and hold them to maturity, you will not lose money in the long run.
Losses in the stock market can be substantial. Stocks enter a bear market decline about every six years on average. Over the last 25 years, the S&P 500 has posted losses of 55% in 2008, 48% in 2001, 34% in 2020 and 25% in 2022. Aggressive growth funds (tech funds) lost 77% in 2001. Older investors simply cannot suffer these kinds of losses.
Time Horizon
One of the biggest mistakes investors make is judging results over the wrong time frame. Short-term performance (6 months, 1 year, even 3 years) is misleading. Any strategy can outperform—or underperform—temporarily.
A full market cycle averages about 7.5 years and includes:
A bear market decline
A steady growth cycle
A volatile growth cycle
You need to know how your strategy performs across all three phases. That knowledge requires patience—far longer than a few months.
Conclusion
You’re now equipped to set intelligent investment goals and expectations. These should align with both your chosen strategy and your emotional comfort level.
You need to decide what you think your average annual returns will be on your investments and what your potential losses could be in bear markets.
If you are conservative investor, you should expect returns between 3% and 5% and only small losses in bear markets. If you are a typical investor that follows the standard industry advice, you should expect returns of around 6.5% and you should be prepared to experience losses of around 30%. If you are an aggressive investor, you could expect returns of 9% to 10% but you need to be prepared to suffer losses of 40% or more in an ugly bear market.
These are not great tradeoffs. Your choices are not that great. That is why I developed my Better and Smarter investment system. I spent years developing a system that can generate average annual returns 13% to 15% and that loses less than 10% in ugly bear markets.
My system is designed to deliver higher long-term returns while minimizing bear-market losses. It was built specifically for older investors who need growth to outpace inflation but can’t afford catastrophic drawdowns.
If you want to learn more about my system and how it can provide better results and peace of mind, click here to schedule a call.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
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