Impact of the US Government Shutdown

US stocks have risen since the last update. Key drivers of the market include the Federal Reserve’s monetary policy, the ongoing US Government shutdown, and upcoming earnings reports. The Fed’s recent meeting notes suggest more easing might occur. Markets expect a 25 basis points rate cut in October and December. However, Fed policymakers have different views on how quickly to ease monetary policy. The minutes from the Fed’s September meeting may influence market dynamics, especially with Fed Chairman Powell’s remarks coming soon. The US Government shutdown is now in its 8th day with no resolution, creating uncertainty in the markets. The postponement of the September employment report adds to these worries, potentially affecting US stock markets if the shutdown continues. Earnings season is heating up, which could show the impact of US tariffs on companies. Major banks like JPMorgan and Goldman Sachs are set to report their earnings soon. If these reports are positive, they could boost market confidence and lift US stock markets. The S&P 500 has reached record highs but may need a pause. The RSI indicator is below 70, pointing to a decrease in bullish sentiment. If the market continues to rise, it could approach the 7000 resistance level, while a downward trend would need to break current support levels.

Current Market Outlook

Remember when traders anticipated multiple Fed rate cuts amid disagreements between doves and hawks? As of October 8, 2025, the picture has changed. The Fed Funds Rate has remained steady at 4.75% for the past six months to help control inflation. The latest September CPI shows core inflation has eased to 2.9%, prompting traders to consider a potential rate cut in early 2026 ahead of the Fed’s meeting minutes next week. The concerns about a government shutdown are resurfacing this month. A new budget deadline is approaching on October 31, 2025, and political gridlock increases the chances of a shutdown. The previous 35-day shutdown from 2018-2019 showed how such events can temporarily cost the economy billions and increase short-term market volatility, which traders should protect against with put options on major indices. Earnings season is here again, but the focus has shifted from past trade tariffs to the effects of today’s higher borrowing costs on corporate profits. The major banks will report next week, with analysts predicting a modest 2.2% year-over-year earnings growth for the financial sector, a slowdown from earlier months. Any negative news from key companies like JPMorgan could lead to market drops, so traders are buying straddles to prepare for potential large price moves in either direction. Unlike the previously overbought and bullish market that was hitting record highs, the S&P 500 is now struggling to stay above the 6420 level after a sharp correction last month. The CBOE Volatility Index (VIX) is currently high at 24, indicating increased market fear compared to the past. This suggests that selling short-term call options could be a good way to earn premium in what looks like a jittery, sideways market. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now