As the government shutdown continues to drag on, some investors are starting to grow worried. Stocks have been sluggish so far in this shutdown, while some appear to be losing confidence in the government reaching a speedy resolution to the crisis.
However, it is worth noting that many of the past government shutdowns haven’t been that bad for stocks, with the average of the ‘long’ shutdowns (over 10 days) knocking the market back roughly 2.5%. And the most recent shutdown left the S&P 500 flat, so there isn’t much a historical precedent for losses due to these government issues (see3 ETFs to Watch in October).
While it is true that some of the worries over the debt ceiling are plaguing markets more this time around, broad markets shouldn’t be too impacted by the budget negotiations. Yet, while broad markets might survive relatively unscathed, not every segment will be so lucky, as the following three ETFs could be in for some rocky trading over the next few weeks, depending on what happens in D.C.:
iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX)
This ETN looks to be a huge beneficiary if the budget battle spills over into the debt ceiling debate. The product tends to benefit when uncertainty rises—traders call the underlying benchmark the ‘fear index’—so if risks are rising this may be a winning pick, even if markets hold up relatively well in the meantime.
iShares U.S. Medical Devices ETF (NYSEARCA:IHI)
In republicans’ efforts to defund the ACA, many in Congress are rallying around the idea of scrapping an excise tax on medical devices.