US Government Reopened, Why Are Markets Not Reacting?

US Government Resumes Operations, But Markets Remain Tepid

The US government has reopened after a prolonged budget crisis, but markets are still lacking enthusiasm. Congress accepted the bill with a 222 to 209 vote in the House of Representatives after Democrats stepped back from demands related to health support programs. Thus, with Trump's signature, federal government operations have resumed.

Although federal agencies are back to work after a 43-day shutdown, investor reactions remain limited. US index futures indicate a bearish opening. The reopening of the government alone is not a factor that will increase risk appetite in the markets; the main issue is the data void created by the shutdown.

Data Void and Investor Sentiment

The inability to release employment and inflation data for October has negatively impacted investors. Markets had priced in the government reopening days in advance, and now only a known result is being formalized. As a result, investor sentiment is expected to clear as uncertainties dissipate.

Last week, during a period when expectations for reopening faded, the put/call ratio of the S&P 500 approached 1, with the market adopting a cautious stance by avoiding risks. With the government reopening, this ratio dropped to 0.8, indicating a certain recovery in risk appetite; however, a cautious atmosphere still prevails.

High Valuations and Economic Pressures

AI-focused stocks and SoftBank's $5.8 billion sale of Nvidia shares have pressured the markets during this period, while ADP's weekly leading employment data has revealed an average loss of 11,250 jobs per week in the private sector. During the shutdown, the US government borrowed a total of $619 billion, which poses a significant burden for the markets even after the reopening.

Economists estimate that this shutdown caused a loss of over 11 points to growth on a weekly basis. This situation reinforces investors' cautious stance. Similar scenarios have been observed after previous shutdowns, where markets exhibited limited movement following the reopening.

The data for October and November, to be released in the coming days, may provide critical signals to the markets ahead of the Fed's meeting in December. For investors, what is important is the resolution of uncertainties and the return of data flow to normalcy.