The federal government has been shut down for six days now, and here’s what’s fascinating: the stock market doesn’t seem to care. In fact, markets have hit multiple record highs since the shutdown began on October 1st. As options traders, let’s cut through the political noise and focus on what actually matters for our positions.
What Actually Happened to Markets
Remember all the doom-and-gloom predictions before the shutdown? Here’s what markets actually did:
Day 1 (Wednesday, Oct 1):
- Morning: Opened lower (S&P down 0.4%, Nasdaq down 0.5%)
- Close: S&P 500 +0.34% to 6,711.20 — new record high
- Nasdaq +0.42%, Dow +0.09%
Week Performance (Oct 1-3):
- All three major indices posted gains over 1% for the week
- S&P 500 and Dow hit three consecutive record closes in the first three days of the shutdown
- VIX stayed remarkably calm around 16.5
Today (Monday, Oct 6):
- S&P 500 up another 0.40% to 6,743
- Markets continue climbing the wall of worry
This is textbook market behavior during shutdowns: initial jitters, then a collective “meh” as traders realize the sky isn’t falling.
The Real Problem: Data Blackout
Here’s what actually matters for us as options traders: we’re flying blind on economic data.
The September jobs report that was supposed to drop Friday, October 3rd? Canceled. The October CPI report scheduled for October 15th? Up in the air.
For traders who live and breathe volatility plays around NFP and CPI releases, this creates a problem:
- No jobs data = fewer high-probability event trades
- Harder to gauge Fed policy shifts
- Volatility strategies need recalibration
That said, the Fed is still nearly 100% certain to cut 25 basis points at the October 29th meeting (up from 90% before the shutdown), partly driven by weak ADP data showing 32,000 private jobs lost in September.
What History Actually Shows
Before you start hedging everything with puts, look at the data from the three longest shutdowns:
S&P 500 Performance During Shutdowns:
- 1995-96 (21 days): +0.16% during, +6.92% three months after
- 2013 (16 days): +1.66% during, +7.90% three months after
- 2018-19 (35 days): +10.43% during, +10.90% three months after
Markets gained during all three extended shutdowns and posted strong rallies afterward. The 2018-19 shutdown is particularly instructive — 35 days long, and the S&P rallied over 10% during it.
Across all 22 shutdowns since 1976, the S&P 500 averaged a 0.3% gain during the shutdown and jumped 13% on average in the 12 months following.
The Ironic Timing
What makes this shutdown particularly interesting is the context: Just days before the shutdown, on September 19th, all four major indices—S&P 500, Nasdaq 100, Dow, and Russell 2000—simultaneously hit record closing highs. This rare event (only the 26th time this century) created extremely overbought technical conditions.
The market was begging for a reason to consolidate. The shutdown might be providing exactly that excuse — except markets keep going up anyway.
How Long Will This Last?
Prediction markets suggest this could drag into mid-October:
- 38% probability it lasts until October 15 or later
- 23% probability for resolution October 6-9
- 22% for October 10-14
- Only 14% expect a deal in the next few days
The average shutdown lasts about 8-14 days, so we could be at the halfway point.
Trading Strategy Adjustments
So what should we actually do with this information?
1. Don’t Overreact to the Initial Move
The market already told us what it thinks: a half-percent dip that reversed by lunch on Day 1. That’s not a signal to panic or drastically change your approach.
2. Recalibrate Volatility Expectations
Without major data releases, realized volatility may compress further. However, implied volatility might stay elevated due to uncertainty. This creates potential opportunities in premium selling strategies — but size appropriately given the data vacuum.
3. Respect the Uncertainty Premium
The lack of economic data makes it harder to trade around specific catalysts. Consider:
- Reducing position sizes on short-dated options
- Avoiding over-leverage without clear catalysts
- Being more selective about entries
4. Focus on What Hasn’t Changed
- Corporate earnings still matter (Q3 season coming)
- Fed is still in accommodative mode
- The economic backdrop that drove markets to records hasn’t fundamentally shifted
- Strong corporate earnings continue to fuel the rally
What Could Actually Matter
Gold hitting its 39th record high this year at $3,898/oz tells you something about safe-haven flows. But the dollar is getting crushed — down 10% for 2025, on track for its biggest annual loss since 2003.
The real wildcard? Trump administration threats of permanent federal layoffs rather than temporary furloughs. If that happens, this shutdown could diverge from historical patterns. But until then, markets are following the usual playbook.
Bottom Line for Traders
Six days in, and the government shutdown has been a non-event for markets. We’ve seen three record highs in the first three days and continued strength through today.
Goldman Sachs noted in their analysis that sharp moves in Treasuries and the dollar during shutdowns typically reverse once resolved. Translation: This is noise, not signal.
The real challenge isn’t the shutdown itself—it’s the data blackout and the timing uncertainty it creates. Without NFP and potentially without CPI, we’re operating with less information than usual for gauging Fed policy and economic momentum.
Trade smaller, stay disciplined with your stops, and remember that uncertainty creates opportunity. The best trades often come when others are paralyzed by headlines.
Markets were looking for a reason to consolidate after hitting records. The shutdown provided the excuse. The market said “no thanks” and kept climbing anyway.
As always, manage your risk appropriately and adjust position sizing based on current market conditions. The government shutdown is creating headline risk without commensurate market risk — so far. Stay flexible and keep your trading plan intact.