The effects of the US government’s potential end to the shutdown continue to impact financial markets. European stocks are on the rise, driven by gains in financial, industrial, and tech sectors. US stock market futures are also indicating a strong opening, with tech stocks expected to recover from last week’s downturn.
AI stocks are experiencing renewed interest, with Palantir and Nvidia seeing increases of 3.3% and 3.4% in pre-market trading, respectively. The conclusion of the US government shutdown is thought to contribute to Monday’s positive market sentiment.
The Monday Effect
The “Monday effect” indicates that stock markets often perform well at the beginning of the week. In 2025, the S&P 500 showed gains 69% of Mondays, reflecting a dip-buying trend after prior sell-offs.
Ending the US government shutdown now facilitates Thanksgiving travel and maintains supply chain efficiency for the shopping weekend. US airlines and retailers are experiencing pre-market gains as a result.
Delayed economic data releases, including jobs data and CPI, will emerge once the shutdown ends, posing potential market challenges. Strong jobs figures or rapid economic growth could negatively influence the stock rally by affecting Federal Reserve rate cut expectations.
Despite recent volatility, the AI sell-off may stabilise. TSMC reported lower sales growth, affecting the market, yet AI chip demand remains robust with companies investing heavily. Sentiment is improving, with continued rises expected, barring any poor data or earnings from Nvidia.
Risk on Sentiment
With the US shutdown ending, we are seeing a clear risk-on sentiment that favors buying call options on broad market indices like the SPY and QQQ. The CBOE Volatility Index (VIX), which spiked to nearly 20 during the shutdown uncertainty last month, has settled back down near 15, making option premiums more affordable. This environment is favorable for positioning for a potential year-end rally.
The rebound in AI stocks like Nvidia and Palantir presents a specific opportunity ahead of key earnings reports expected in the coming weeks. We should consider purchasing call options on these leaders to capitalize on the renewed momentum. However, a vertical call spread could be a prudent strategy to limit costs and define our risk, especially given the market’s recent volatility.
The timing before Thanksgiving is a direct catalyst for consumer-focused sectors, so we are also looking at bullish plays on airlines and retailers. Options on ETFs like JETS (airlines) or XRT (retail) offer a way to gain exposure to the expected holiday travel and shopping surge. Historically, positive consumer sentiment in the week of Black Friday has provided a tailwind for these groups.
The biggest near-term risk is the upcoming release of delayed economic data, particularly the jobs report and CPI inflation numbers. We must hedge our bullish positions against the possibility of strong data, which could spook the market by delaying expected Federal Reserve rate cuts. Purchasing some cheap, out-of-the-money put options that expire in late November or early December is a necessary precaution.
This data is crucial because it directly influences the Fed’s path, and the market has been thriving on the prospect of easier monetary policy. Currently, Fed funds futures are pricing in a greater than 70% probability of the first rate cut occurring in the first quarter of 2026. A hot inflation or jobs print could quickly cause those odds to fall, triggering a sell-off.
Assuming the economic data does not come in excessively strong and Nvidia’s earnings meet expectations, the path seems clear for stocks to continue their upward trend. We saw a similar pattern back in 2023, where the market overcame uncertainty to post a strong finish to the year. Therefore, selling some out-of-the-money put options with December expirations could be an effective way to generate income while betting on continued stability.
