Investors are nervous.  This is a natural reaction to the negativity
broadcast by the news media.  It is
important to isolate the two news topics and evaluate each one:  (1) the DEBT CEILING, and (2) THE U.S.
GOVERNMENT “SHUTDOWN.”

Moody’s Investors Service sees very little chance of a U.S. debt
default later this month, the rating agency’s president and chief operating
officer said on Tuesday. “We have a “AAA” rating and
“stable” outlook (for the United States), which reflects our view
that a default is an extremely unlikely event”, Michel Madelain, President,  told a conference in Tel Aviv. “The shutdown
does not really affect the government’s creditworthiness.”   He
said the agency believes the U.S. government will take every possible step to
continue to pay interest and principal on its debt even if the debt limit is
not raised. (Source:  Reuters)

RECOMMENDATION:  Avoid
reacting to an event that is labeled as extremely unlikely.  Maintain your long term asset
allocation. 

As to the SHUTDOWN, the
duration of the shutdown does matter, if history is any guide, according to
Richard Salsman, chief market strategist at InterMarket Forecasting. Shorter
shutdowns are innocuous, but longer ones are bearish, he says. There have been 17 previous shutdowns since 1976,
ranging from one day to 21, with an average of six. The S&P 500 has fallen
by a mean 0.8% in past shutdowns, but for those lasting 10 days or more, a
decline happened 80% of the time and averaged 2.6%, he says. One month after
the longer shutdowns ended, stocks were still down slightly, compared with a
1.7% average rise after the shorter shutdowns ended. (Source:  Barrons Online).

RECOMMENDATION: 
Avoid the temptation to time the market. 
Maintain your long term asset allocation.  Be prepared to add cash to your investment portfolio
if a drop occurs from a prolonged shutdown.