On October 1, the US government entered a shutdown after Congress failed to pass new funding. The headlines sound ominous, but should investors really be alarmed? Not necessarily. Shutdowns are disruptive, but they’re usually temporary. Federal workers will eventually return, agencies will restart, and backlogged data will be released. Still, even a brief disruption can hurt confidence and add short-term volatility to markets. So what happens to portfolios when Washington grinds to a halt? And what, if anything, should investors do about it? How a Government Shutdown Happens A government shutdown occurs when Congress fails to pass legislation that funds federal agencies and programs, or when the President refuses to sign it into law. Without that approval, non-essential parts of the government lose legal authority to spend money. Certain operations, like national defense, law enforcement, air traffic control, and Social Security payments, are classified as “essential” and must continue during a shutdown. But essential doesn’t mean immune from financial stress. Essential workers are supposed to continue working without pay, which can create real financial hardship and tension. For example, air traffic controllers are required to