US Government shutdown officially ends

Highlights: The longest federal shutdown in US history has ended after a 43-day closure following a temporary funding deal, reducing near-term fiscal tail risks, and stabilising the short-term funding markets. We stay constructive on US equities, though have tactically trimmed our US stocks overweight as uncertainty around data and Fed cuts, and potential delays in AI roll-out could lead to some volatility, especially after the sharp 2025 rally. Still, earnings growth is accelerating, supported by AI-led productivity gains and multiple structural tailwinds. Hence, we maintain a small overweight. We also favour high-quality bonds and global IG credit that act as a good hedge and offer attractive carry.

• The agreement reopens the government immediately and funds most federal agencies through 30 January 2026. Several key programs including SNAP, Agriculture, FDA, Veterans Affairs, military construction, and Congress will be funded through 30 September 2026. With another funding deadline approaching in late January, fiscal uncertainty remains a potential near-term risk
• According to the Congressional Budget Office (CBO), the shutdown could lower Q4 GDP by as much as 2.0 per cent in an eight-week scenario, i.e. about USD14 billion won’t be recovered at all. Importantly, though, much would be reversed in Q1 2026, for which the CBO states that a rebound in federal spending could boost GDP by as much as 3.1 per cent
• Government agencies are now working through operational backlogs and will release an updated data calendar. The Senate will vote on ACA subsidies in mid-December, followed by critical holiday spending signals. The next major risk point is 30 January 2026, when funding for most agencies expires again raising the possibility of another partial shutdown if no agreement is reached
• Our more tempered US short-term optimism was also reflected in overnight market performance, with the S&P and Nasdaq falling nearly 1.7 per cent and 2.3 per cent respectively, led by tech as investors have little visibility on the impact of the shutdown on earnings. Although data flow should now resume, uncertainty around timing, accuracy, and completeness of key inflation and labour market indicators – alongside the direct economic impact of the shut down – may tactically weigh on sentiment