Historical Playbook: Markets Usually Look Past Shutdowns

History suggests government shutdowns rarely deliver lasting blows to markets. Since 1976, there have been 20 shutdowns averaging about a week. On average, the S&P 500 posts no net change during shutdowns but gains in the aftermath — up 13% one year later on average, including an 11% rally after the record 35-day shutdown of 2018-2019.

Traders note that during shutdowns, the government defers about $400 million in daily costs, and the Fed often adopts a more dovish stance as economic data flow dries up.

Why This One Feels Different

Despite the historical calm, economists warn that this episode could be riskier than previous shutdowns. President Donald Trump has threatened to enact mass layoffs of federal workers during the shutdown — a sharp break from past practice where furloughed staff were repaid and rehired. Permanent cuts could deliver a more durable hit to growth and push unemployment higher.

Stephanie Roth, chief economist at Wolfe Research, warned such layoffs would be “a really big economic problem,” while Jared Bernstein, a former Biden advisor, said it would be “profoundly unfair” and economically reckless.

Economic Data Goes Dark

One of the most immediate impacts is the blackout of key government reports. The September jobs report, due Friday, won’t be released if the shutdown continues. Other critical releases — including inflation reports the Fed relies on for rate policy — would also be delayed.

Nathan Sheets, global chief economist at Citigroup, said this would complicate monetary policy decisions: “It’s already complicated enough to interpret the labor market data. If we have a period of time where the data isn’t available, those challenges would significantly increase.”

Private data, such as Thursday’s ADP report showing a 32,000 decline in private-sector jobs, will therefore carry extra weight. Challenger, Gray & Christmas also reported September layoffs of 54,064, with year-to-date cuts nearing 950,000 — the highest since 2020.

Market Reaction So Far

Wall Street initially dipped but closed higher on Wednesday, with the Dow up 43 points, the S&P 500 +0.34%, and the Nasdaq +0.42% — both the Dow and S&P notching record closes. Investors are betting the shutdown will be short-lived.

But safe-haven demand surged. Gold hit a record $3,900/oz before easing, now up 47% year-to-date. Silver also rallied, gaining 63% in 2025. UBS analysts urged clients to “look past shutdown fears” and focus on other drivers such as Fed rate cuts, corporate earnings, and AI investment.

Still, currency markets showed jitters. The US dollar halted a four-day losing streak, but economists warned prolonged dysfunction could push capital into the euro and yen. Emerging-market currencies already slipped on Thursday.

What It Means for Your 401(k)

For retirement savers, past experience suggests little long-term impact. Since shutdowns tend to mimic a “hurricane or snowstorm” — temporarily delaying activity but quickly making up for it — most economists argue that 401(k) investors should stay the course.

However, the Trump administration’s threat of permanent layoffs and the economy’s weaker footing in 2025 make this shutdown more unpredictable. As David Kelly, chief global strategist at JPMorgan Asset Management, put it: “The timing is bad. It’s a little bit more dangerous this time.”

Shutdowns are usually political theater with limited market impact. But this one is unfolding against a backdrop of slowing job growth, heightened tariff pressures, and Fed uncertainty. If Trump follows through with federal layoffs or if the shutdown stretches toward the 2018 record, markets could stop shrugging and start recalibrating risk.

For now, Wall Street is betting on history — that the lights will come back on in Washington sooner rather than later.

Related: US Government shutdown watch: what it means for markets — and your wallet

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

The post US Government Shuts Down for First Time Since 2018: What It Means for Markets, the Economy, and Your 401(k) first appeared on Finblog.

What the Order Does

The executive order, signed on August 7, directs the Labor Department and the Securities and Exchange Commission to re-evaluate existing rules governing the inclusion of alternative assets in workplace retirement plans. Specifically, it calls for:

• Review and clarification of fiduciary duties under the Employee Retirement Income Security Act (ERISA) for offering alternative investments.
• Identification of criteria for balancing potentially higher expenses with the goal of greater long-term returns and diversification.
• Exploration of rule changes to make it easier for plan sponsors to include options like private equity, private credit, real estate, commodities, and cryptocurrencies in defined contribution plans such as 401(k)s.
• Coordination across agencies, including Treasury Secretary Scott Bessent and the SEC, to assess whether broader regulatory adjustments are needed.

Currently, there is no explicit legal prohibition on including such investments in retirement plans — but fiduciaries have generally avoided them due to legal risk, fee concerns, and complexity.

Why It’s Significant

The move marks a sharp departure from the Biden administration’s stance, which had warned about the dangers of crypto in retirement plans. Trump’s order could encourage large asset managers — such as BlackRock, Fidelity, Blackstone, Apollo, and KKR — to roll out products incorporating private equity or crypto into 401(k) menus.

BlackRock, which lobbied for expanded options, has already announced plans for a retirement fund combining private equity and private credit, expected in 2026. Proponents argue that these investments can boost long-term returns and give everyday savers access to markets once reserved for institutional and wealthy investors.

Potential Benefits and Risks

As BlackRock CEO Larry Fink noted, the biggest challenge for asset managers is litigation risk. Past Department of Labor guidance under Trump allowed some private equity exposure in 401(k)s, but uptake was minimal due to fear of lawsuits.

What to Expect Next

• No Immediate Changes: Analysts say new rules could take until 2026 to implement.
• Plan Sponsor Due Diligence: Employers will still have to thoroughly vet any new products — from strategy and performance to fee structures.
• Selective Adoption: Target-date funds and collective investment trusts may be the first vehicles to incorporate alternative assets.
• Potential Crypto Uptake: Firms like Fidelity and Hashdex say this could accelerate the inclusion of Bitcoin in long-term investment strategies.
• Ongoing Political Debate: Expect pushback from Democrats, consumer advocates, and some fiduciary groups over investor protection concerns.

Industry Reaction

• Support: Asset managers see a new revenue stream. Blackstone and Apollo welcomed the decision, calling it a “modernization” of retirement investing.
• Caution: Morningstar analyst Jason Kephart said that while the market opportunity for managers is huge, it’s “less clear” how individual investors will fare once fees and complexity are factored in.
• Legal Perspective: Rutgers Law professor Arthur Laby noted that executive orders can influence agency policy but don’t override decades of fiduciary law.
• Plan Provider Approach: Betterment, which offers both 401(k)s and crypto portfolios, does not currently include digital assets in standard retirement plans, citing fiduciary rules.

Trump’s executive order is a starting gun for a potentially transformative change in retirement investing — one that could open access to high-growth, high-risk assets for millions of Americans.

For now, the impact will depend on how quickly regulators move, how cautious employers remain, and how asset managers balance opportunity with investor protection. Whether it’s a game-changer for savers or a legal minefield for employers will play out in the years ahead.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

Related:

Trump Explodes Over Nancy Pelosi Stock Ban

Fed Governor Adriana Kugler Resigns, Opening Door for Trump

Trump Imposes New Global Tariff Rates, Effective August 7

What Happens After Tariff Deadline and What Next 72 Hours Look Like for Markets

Trump’s Tariffs Are Real, But Are His Trade Deals Just for Show?

Figma Is Largest VC-Backed American Tech Company IPO in Years

The post What Is Trump’s New Order Opening 401(k)s to Private Equity, Crypto, and Alternative Assets? first appeared on Finblog.

• Growing Adoption: Since the first state auto-IRA program in 2017, 17 states have enacted such programs to help workers without access to employer retirement plans.
• Impressive Savings: Data from eight state programs shows that more than 900,000 workers have saved over $1.7 billion through auto IRAs.
• Increased Participation: Research by Gusto indicates that workers in states with auto IRAs are 20% more likely to save for retirement, with a 55% increase in savings rates among low-to-middle-income earners.
• Policy Effects: The programs often push more employers to offer their own retirement plans, likely spurred by new incentives and a recovering post-pandemic economy.
• Future Enhancements: Starting in 2027, some workers may also benefit from a federal savers’ match, potentially increasing the attractiveness of participating in auto IRAs.

State-sponsored auto IRAs represent a promising step toward addressing the retirement savings crisis, particularly for those least likely to have workplace retirement accounts. These programs not only encourage saving but also create a ripple effect, encouraging more businesses to offer their own retirement solutions.

The post No 401(k)? An alternative has helped US workers save more than $1.7 billion first appeared on Finblog.

• New Contribution Limits: The general contribution limit for 401(k)s and similar plans will increase to $23,500, up from $23,000.
• Catch-Up Contribution Stays: The catch-up contribution limit for those 50 and older remains unchanged at $7,500.
• Special Provision for Ages 60-63: A new provision allows increased catch-up contributions of $11,250 for those aged 60 to 63, raising their total possible contribution to $34,750.
• Reality of Contributions: Despite the increased limits, historical data, such as Vanguard’s 2024 report, shows that only 14% of participants max out their 401(k) contributions, typically those with higher incomes and longer tenures.
• IRA Contribution and Income Thresholds: The IRA contribution limit remains at $7,000, with the catch-up amount at $1,000. However, income thresholds for tax-advantaged contributions to IRAs have increased.
• Roth IRA Adjustments: The income limit for single filers contributing to a Roth IRA rises to $165,000 from $161,000; for married couples filing jointly, it goes up to $246,000 from $240,000.
• Traditional IRA Adjustments: For single filers covered by a workplace plan, the AGI limit is now $89,000, up from $87,000. For married filers where the individual is covered, it’s $146,000, up from $143,000.
• Saver’s Credit Update: Income thresholds for the Saver’s Credit have also increased, now at $39,500 for singles, $59,250 for heads of households, and $79,000 for married couples filing jointly.

The 2025 adjustments in retirement savings limits reflect ongoing efforts to aid Americans in securing a financially stable retirement, especially given the persistent challenges of housing affordability and other economic pressures. While these changes benefit those who can afford to save more, broader systemic reforms may still be necessary to address the needs of all workers.

The post What the new 401(k) limits and other changes mean for your retirement first appeared on Finblog.

One of the most compelling reasons to invest early is to take advantage of compound interest. Compounding occurs when your investment returns are reinvested, generating additional returns on those returns. This exponential growth can turn even small, consistent investments into a substantial sum over time.

How Compound Interest Works

Investing in assets like stocks or mutual funds adds your returns to your initial investment. If those returns are reinvested, the subsequent returns are earned on a larger amount, which can dramatically accelerate your wealth accumulation. The longer your money is invested, the more it benefits from compounding.

For example, if you invest $1,000 at age 25 with an annual return of 7%, your investment would grow to over $16,000 by age 65. In contrast, starting the same investment at age 35 would result in just over $8,000 by age 65.

Time in the Market vs. Timing the Market

The earlier you start investing, the more time your money has to grow. Even with market volatility, the overall upward trend of the stock market has historically favoured long-term investors. As financial experts say, “Time in the market beats timing the market.” By staying invested over a long period, you benefit from market recoveries after downturns, reducing the need for perfectly timed trades.

Risk Management and Time to Recover

When you start investing early, you also have more time to take risks and recover from potential losses. Young investors have the advantage of a longer investment horizon, allowing them to invest in high-risk, high-reward assets like stocks, which can yield higher returns over time.

1. Higher Risk Tolerance

Younger investors can afford to invest more aggressively because they have time to ride out the inevitable ups and downs of the market. Riskier investments, such as individual stocks or growth-focused ETFs, tend to fluctuate more but also offer the potential for greater returns in the long run.

As you approach retirement, it’s common to shift to more conservative investments, such as bonds, to protect your wealth. However, starting with a higher-risk portfolio when you’re young gives you the chance to benefit from higher growth over time.

Recovery from Market Downturns

Another benefit of starting early is the ability to recover from market downturns. Stock markets experience periods of volatility, but over the long term, they have consistently provided positive returns. For example, after the 2008 financial crisis, it took several years for markets to recover, but investors who stayed the course reaped substantial rewards in the following decade.

By starting early, you can afford to wait out these downturns, allowing your portfolio to recover from temporary losses and grow in value over time.

Building Financial Discipline and Long-Term Goals

Starting to invest early is about more than just returns—it also helps build financial discipline. It sets the stage for achieving long-term financial goals, such as buying a house or retiring comfortably.

Developing Consistent Saving and Investing Habits

Investing early encourages the development of healthy financial habits. By regularly contributing to an investment account, such as a 401(k) or brokerage account, you cultivate the discipline needed to manage your finances effectively. Automatic contributions to your retirement or investment accounts ensure that you continue saving even when life gets busy.

Financial experts recommend saving at least 10-15% of your income for retirement. Starting early allows you to reach your financial goals with smaller contributions because your investments have more time to grow.

Reaching Long-Term Financial Goals

Whether you want to retire early, travel extensively, or build generational wealth, starting to invest early puts you on the path to achieving these goals. The longer your money is invested, the more likely it is to accumulate enough to fund major life events. Early investments also help secure a more comfortable retirement by allowing you to save more over time and benefit from market growth.

Advantages of Tax-Advantaged Accounts

Investing early also gives you more time to take advantage of tax-advantaged accounts, such as Roth IRAs and 401(k)s. These retirement accounts offer tax benefits that allow your investments to grow tax-free or tax-deferred, depending on the account type.

1. Roth IRA

A Roth IRA allows you to contribute after-tax income, meaning your investments grow tax-free, and you can withdraw your earnings tax-free in retirement. For young investors, Roth IRAs are particularly attractive because you’re likely in a lower tax bracket, meaning the tax-free growth becomes more valuable over time.

2. 401(k)

A 401(k) is another powerful retirement savings tool, especially if your employer offers a matching contribution. Contributing to your 401(k) early allows your investments to grow tax-deferred until you begin withdrawing funds in retirement. Employer matching contributions are essentially free money, so starting early maximizes your retirement savings.

The Cost of Waiting to Start Investing

Delaying your entry into the stock market can significantly reduce the amount of wealth you can accumulate. The longer you wait, the less time you have to take advantage of compounding, and the more you’ll need to invest to reach the same financial goals.

For example, investing $5,000 annually starting at age 25 can grow to over $1 million by age 65 with an average annual return of 7%. However, if you wait until age 35 to start investing the same amount, your savings will only grow to around $500,000 by retirement age.

Related articles:

Best Investing Apps in 2024

How to buy a stock? A beginner guide for new investors

How to invest in stocks: Full Guide for Beginners with Tips

How to Invest in Gold and Silver: A Step-by-Step Guide

How Much Money Should You Have Saved by Age 30?

Common Mistakes People Make When Investing and How to Avoid Them

Behaviors That Prevent Smart Investing Decisions and How to Overcome Them

How to Get a Startup Business Loan with No Money Online: A Step-by-Step Guide

Sources:

• https://www.associatedbank.com/education/articles/personal-finance/investing/investing-early-and-often
• https://www.rbcgam.com/en/ca/learn-plan/retirement-resources/the-importance-of-starting-early/detai
• https://www.axisbank.com/progress-with-us/invest/top-reasons-to-start-investing-at-an-early-age

The post Why Is It Important to Start Investing as Early as Possible? first appeared on Finblog.