US Senate agreement begins government reopening process

Highlights: The US Senate reached a bipartisan deal to extend government funding through 30 January 2026, marking a key step towards ending the longest government shutdown in American history. The resolution reduces immediate fiscal uncertainty and stabilises short-term funding markets, with investors viewing it as incrementally risk positive. Combined with the ongoing positive earnings momentum in US, this further supports our constructive US equity outlook. While we remain overweight on US equities, we also favour high-quality bonds and global IG credit that act as a good hedge against equity market volatility and offer attractive carry, bringing stability and resilient income to portfolios amid falling policy rates.

• The agreement provides full-year funding for SNAP and restores back pay and employment protections for federal workers, while also securing a mid-December vote on Affordable Care Act (ACA) subsidy extensions. The measure must still pass the House before the shutdown officially ends
• The bill reverses any federal layoffs or reductions in force during the shutdown, provides back pay, and bars further layoffs through fiscal year-end
• Policy concessions: Senate Majority Leader John Thune promised Democrats a mid-December vote to extend ACA subsidies, which are set to expire without congressional action. Democrats will control the legislative text of that extension
• The markets expect the shutdown may formally end by Saturday, which would provide greater clarity on key macro data including jobs and inflation, reducing uncertainty around the near-term path for interest rates. The improved policy visibility will help recover market sentiment, lifting US equities and bonds
• Early market reaction has been optimistic, with S&P 500 and Nasdaq advancing 1.5 per cent and 2.3 per cent, respectively, on Monday as risk appetite improved. On the credit side, yields on US Treasuries ticked up as safe-haven demand eases. That said, there is still uncertainty on when the shutdown could formally end. Hence, we reiterate our focus on multi-asset diversification to mitigate drawdown risks from policy uncertainties