The US government’s plans to end the shutdown are shaking up financial markets. European stocks are rising, boosted by gains in financial, industrial, and tech sectors. US stock market futures are also showing a strong opening, with tech stocks expected to bounce back from last week’s losses. AI stocks are getting renewed interest, with Palantir and Nvidia rising by 3.3% and 3.4% in pre-market trading, respectively. The end of the US government shutdown is contributing to the positive market mood on Monday.

The Monday Effect

The “Monday effect” tells us that stock markets often do well at the start of the week. In 2025, the S&P 500 gained on 69% of the Mondays, indicating a trend where investors buy after sell-offs. Now that the US government shutdown is ending, it will help with Thanksgiving travel and keep supply chains running smoothly for shopping events. US airlines and retailers are seeing gains in pre-market trading because of this. Delayed economic data, including jobs and inflation numbers, will be released once the shutdown ends, which could pose challenges for the market. Strong job figures or rapid economic growth could hurt the current stock rally by changing expectations for Federal Reserve rate cuts. Despite recent ups and downs, the AI sell-off might stabilize. TSMC has reported lower sales growth, affecting the market, but demand for AI chips remains strong, with companies continuing to invest significantly. Sentiment is improving, and further rises are expected unless NVIDIA shows weak data or earnings.

Risk on Sentiment

With the end of the US shutdown, there is a clear “risk-on” sentiment encouraging investors to buy call options on major indices like the SPY and QQQ. The CBOE Volatility Index (VIX) spiked to nearly 20 during shutdown uncertainty last month but has now settled around 15, making option premiums more affordable. This situation is ideal for positioning for a potential year-end rally. The rebound of AI stocks, such as Nvidia and Palantir, presents a great opportunity before key earnings reports in the coming weeks. We should consider buying call options on these stocks to take advantage of this renewed interest. A vertical call spread might be a wise move to limit costs and manage risk, especially in light of recent market volatility. With Thanksgiving approaching, we are also eyeing consumer-focused sectors like airlines and retailers. Options on ETFs like JETS (for airlines) and XRT (for retail) can provide a way to tap into the expected surge in holiday travel and shopping. Historically, positive consumer sentiment during the week of Black Friday has been beneficial for these industries. The main risk in the short term is the upcoming release of delayed economic data, especially the jobs report and inflation numbers. We need to protect our bullish positions against the chance of strong data, which could unsettle the market and delay expected Federal Reserve rate cuts. Buying some inexpensive out-of-the-money put options expiring in late November or early December is a necessary precaution. This data is critical because it affects the Fed’s decisions, and the market has been thriving on hopes for easier monetary policies. Currently, Fed funds futures indicate a greater than 70% chance that the first rate cut will happen in early 2026. A strong inflation or jobs report could quickly reduce those odds and lead to a sell-off. If the economic data comes in as expected and Nvidia meets earnings forecasts, stocks are likely to keep rising. We saw a similar trend in 2023, where the market overcame uncertainty and finished the year strong. Therefore, selling some out-of-the-money put options with December expirations could be a good way to generate income while betting on ongoing stability. Create your live VT Markets account and start trading now.

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