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The government shutdown could send investors for a ride, history shows

  • CNBC analysis using Kensho found that the S&P 500 falls an average of 0.3 percent one week after the government closes its doors.
  • One of the best-performing assets one week after a shutdown is the Cboe Volatility Index, which rises an average of 9.7 percent.
  • But the pullback in stocks after a government shutdown is often short-lived, history shows.
Caution tape hangs near the steps of Federal Hall across from the New York Stock Exchange in New York.
Michael Nagle | Bloomberg | Getty Images
Caution tape hangs near the steps of Federal Hall across from the New York Stock Exchange in New York.

The U.S. government shut down on Saturday and that could spell trouble for investors in the near term, history shows.

CNBC analysis using Kensho found that the S&P 500 falls an average of 0.3 percent one week after the government closes its doors. The benchmark index also trades positive just 40 percent of the time one week after a shutdown.

One of the best-performing assets one week after a shutdown is the Cboe Volatility Index, also known as the VIX and considered the best gauge of fear in the market. It trades positive 75 percent of the time one week after a shutdown and averages a return of 9.7 percent.

Stock futures pointed to a lower open on Monday. Dow Jones industrial average futures declined 49 points, while S&P 500 and Nasdaq 100 futures fell 2 points and 3.5 points, respectively.

Last Tuesday, stocks failed to hold strong gains as the possibility of a government shutdown loomed over investors' minds. The Dow erased a 283 point gain, closing down 10.3 points. The S&P 500 also saw its advances evaporate, closing 0.4 percent lower after rising as much as 0.8 percent.

Congress needed to pass a spending bill by the end of Friday to avoid a government shutdown. A point of contention between Republicans and Democrats is an immigration bill that Democrats want to pass. Those talks have complicated efforts to keep the government open.

"DACA is actually the easy issue for a budget compromise. More difficult is needed legislation to avoid defense and non-defense spending cuts under the sequestration required by the Budget Act of 2011," said L. Thomas Block, Washington policy strategist at Fundstrat Global Advisors.

On Sunday, however, Republican lawmakers were getting behind a plan that would keep the government funded through Feb. 8. Meanwhile, some Democrats are preparing to give immigration concessions to the GOP.

This is the first U.S. government shutdown since 2013.

But the pullback in stocks after a government shutdown is often short-lived, history shows. The S&P 500 averages a return of 2.1 percent a month after a shutdown and trades positive 80 percent of the time.

The VIX, meanwhile, averages a return of just 0.9 percent a month after a government shutdown.

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.