Markets Rotate as Shutdown Ends and Fed Tone Turns Hawkish

November 17, 2025

Financial Markets

U.S. equities finished the week mixed as investors weighed the end of the historic 43-day government shutdown against renewed concerns about monetary policy. Stocks initially rallied on optimism that Washington had reached a resolution, but momentum faded late in the week as expectations for a December rate cut diminished.

Sector leadership shifted notably, with investors rotating out of richly valued technology names and into lagging sectors such as healthcare, energy, and materials. The move reflected a growing perception that the Federal Reserve may hold rates steady rather than ease at its final meeting of the year. Attention now turns to Nvidia’s earnings report on Wednesday, which investors will watch closely for insight into the durability of the AI-driven trade.

While the end of the shutdown helped lift near-term sentiment, many investors remain cautious. The market’s leadership continues to broaden—a constructive development—but the transition away from narrow, growth-driven gains toward more balanced participation could create short-term volatility before a firmer footing is established.

Economics

Shutdown Ends After 43 Days

President Trump signed a bipartisan spending bill into law late Wednesday, formally ending the longest government shutdown in U.S. history. The measure funds operations through January and authorizes back pay for furloughed federal workers, along with temporary restoration of food assistance benefits under SNAP. However, because the bill defers decisions on a majority of discretionary spending measures, the agreement sets up another potential funding showdown early next year.

Federal agencies have begun to restart operations, but the data vacuum left by more than six weeks of closure will take time to resolve. Several major statistical releases—including the October employment and inflation reports—could be skipped entirely. The Bureau of Labor Statistics has not yet indicated whether future reports will consolidate missing data, creating challenges for policymakers and market participants ahead of the December 10^th Federal Open Market Committee (FOMC) meeting.

Fed Officials Push Back on Easing Expectations

Recent comments from Federal Reserve officials leaned decidedly hawkish, tempering expectations for near-term rate cuts. Boston Fed President Susan Collins emphasized that further easing would require clear evidence of labor-market deterioration, while St. Louis’s Mohammed Mulsalem and San Francisco’s Mary Daly both cited caution amid lingering inflation risk. Cleveland’s Lisa Hammack underscored the importance of maintaining policy credibility and warned against cutting rates prematurely.

As a result, futures markets now imply less than a 50% probability of a December cut—the lowest since the October meeting. Policymakers’ hesitance underscores the difficulty of assessing conditions in the absence of timely economic data.

White House Pursues Targeted Tariff Relief

On the trade front, the administration announced new frameworks with El Salvador, Argentina, Ecuador, and Guatemala aimed at reducing tariffs on select agricultural imports, including coffee and bananas. Treasury Secretary Bessent indicated that further tariff relief is forthcoming on products not produced domestically. Additional negotiations are underway with Switzerland and South Korea to reduce existing levies and broaden reciprocal market access.

These steps are part of a broader White House effort to address affordability concerns following recent Democratic electoral gains. Proposals under discussion include “tariff dividend” payments, expanded healthcare subsidies, and support for lower-cost mortgages. While such measures may ease near-term price pressures, their ultimate impact on inflation and fiscal balances remains uncertain.

Conclusion

The shutdown’s resolution removes an immediate headwind for both markets and policymakers, restoring some operational normalcy and reducing short-term uncertainty. However, the temporary nature of the funding agreement means fiscal risks could resurface early next year.

At the same time, hawkish Fedspeak and incomplete economic data complicate the outlook for December’s policy meeting. Investors are likely to focus closely on the first wave of post-shutdown releases—particularly inflation and labor metrics—which may have an outsized influence after weeks of limited visibility.

The administration’s push for selective tariff relief and affordability measures marks a constructive shift in tone but stops short of resolving broader trade and fiscal concerns. For now, investors should interpret recent policy actions as incremental relief rather than lasting resolution. Discipline, diversification, and attention to evolving data remain key as markets navigate the transition from political disruption to renewed economic assessment.

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