US Shutdown: Where's the Buying Opportunity?

The government shutdown in the US has been a major disappointment for those who, like Morningstar columnist Rodney Hobson, are looking to make further investments in shares

Rodney Hobson 4 October, 2013 | 10:53AM
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The government shutdown in the US has been a major disappointment for those who, like me, are looking to make further investments in shares. I had expected the market to fall heavily when Democrats and Republicans failed to reach a deal on the budget but the indices on both sides of the Atlantic have held up remarkably well, thus failing to present a clear cut buying opportunity.

Stock markets are presumably assuming that the stand-off will not last long, on the grounds that the Republicans caved in the last time they pulled this stunt on Bill Clinton and found they were harming themselves more than the president. Any damage inflicted on the US economy in the meantime will postpone tapering of the Fed’s support operation.

Regular readers will be aware that I regard tapering as a good sign and any delay in curbing support for the economy is bad news. In any event, the stand-off between the Republican-controlled House of Representatives and the Democrat president will continue with damaging effects until at least the end of next year. If the Republicans do well in mid-term elections in November 2014, the US will be stuck with a lame duck president until January 2017.

It is now more than 100 years since we had a similar confrontation in the UK in 1910. It took two general elections and an historic curbing of the powers of the House of Lords to ensure it would not happen again. No such remedy is available in the US.

I shall, therefore, be looking for a compelling investment case specific to a particular company in deciding where to put the rest of this year’s ISA entitlement rather than base my judgement on wider economic issues.

Rodney Hobson is a long-term investor commenting on his own portfolio; his comments are for informational purposes only and should not be construed as investment advice.

Read Rodney Hobson's regular column here.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.