Concerns are rising over the U.S. government’s shutdown (sectoral suspension). Goldman Sachs, a U.S. investment bank, analyzed that the shutdown does not have a widespread impact on the stock market as a whole, but defense stocks with high government-oriented sales could be hit.
According to the Washington Post and others on the 23rd (local time), the White House Budget Office asked federal agencies to prepare for shutdown response procedures. Currently, the U.S. ruling and opposition parties are at odds over the upper limit on the national debt. If Congress does not approve the budget bill by the 1st of next month, government agencies will be closed for now when the new fiscal year begins.
It was found that the government’s shutdown did not have a widespread impact on the stock market. According to Goldman Sachs, the government’s shutdown has lasted a total of 14 times since 1981, an average of 7 days, during which the S&P 500 index rose 0.7 percent on average. Goldman Sachs said, “The macroeconomic environment was more important to the stock market than shutdown.”
However, companies whose government spending accounts for a significant portion of their profits had sluggish returns during the shutdown. Defense industries were mentioned the most. According to a Goldman Sachs survey, military shipbuilding company Huntington Ingirls Interstries (HII) accounts for 99 percent of its sales. In contrast, Mercury Systems (MRCY), which operates the aerospace and defense industries, also accounts for 99 percent of its sales. Lockheed Martin (LMT) also had an absolute proportion of 99% of its sales. In addition, defense company Northrop Gourman (NOC) also accounted for 97 percent of its sales.
Healthcare company Oak Street Health (OSH) also had a high proportion of the government in sales at 98%. Oak Street Health operates a primary clinic for Medicare beneficiaries through its subsidiary. In addition, consulting firm Booz Allen Hamilton Holding (BAH) also accounted for 96% of the government’s sales. In addition, engineering company Science Applications International (SAIC) also accounted for 97 percent of its sales, while information service provider CACI International (CACI) also dominated 96 percent of its sales.