The longest government shutdown in U.S. history is about to end, and history shows that U.S. stocks often continue to rise after reopening.

Since the U.S. government shutdown began on October 1, the S&P 500 Index has risen 0.6% over the past 40 days, and on Monday, when the shutdown appeared to be ending within days, U.S. stocks saw even more noticeable gains. According to historical data, the benchmark U.S. stock index is likely to continue climbing in the upcoming holiday season.

According to data compiled by Sam Stovall, Chief Market Strategist at CFRA, in the month following the previous 15 U.S. government shutdowns, the S&P 500 Index rose by an average of 2.3%. If a similar increase occurs this time, the S&P 500 Index could approach 7,000 points by mid-December. Stovall stated that after a shutdown ends, market corrections seem to be delayed. History shows that the market usually rises a month after the shutdown ends.

In fact, the market was not completely calm during the five weeks of the government shutdown. In the week of October 10, concerns about trade tensions led the S&P 500 to fall by 2.4%. Last week, the S&P 500 dropped 1.6% due to the AI-themed trading beginning to appear somewhat speculative. However, during this period, thanks to better-than-expected corporate earnings, the stock market rose more than 4% in three weeks.

According to CFRA data, since the beginning of the current government shutdown, the S&P 500 has risen 2.2%, which is higher than the average performance during past shutdowns since 1981.

After Senate Democrats agreed to a floor vote on the related agreement, the current U.S. government shutdown deadlock could end as soon as Wednesday, although the agreement still needs approval from the House of Representatives. Investors believe this means the risk of broad damage to the U.S. economy and corporate earnings has been avoided, prompting a positive response.

The market can now refocus on the path of monetary policy, with expectations that the Federal Reserve will make its third consecutive rate cut next month, and pay attention to the impact of tariffs on inflation. Keith Lerner, Chief Investment Officer and Chief Market Strategist at Truist Advisory Services Inc., said:

This is a moderate positive development, and people can continue to look forward, but soon the market's attention will return to technology and the most important parts of the market. Investors will now be watching Nvidia's earnings report on November 19.

With federal employees returning to work and normal economic data releases resuming, some of the uncertainty previously faced by the market has been removed. Strategists still believe the U.S. stock market has upward momentum, even though equities have posted modest gains during the period.

Some analysts point out that some previously strongest stocks, such as the seven tech giants that account for about a quarter of the S&P 500's weight, have recently seen pullbacks, which may attract bargain hunters. The recent retreat in AI concept stocks may present attractive trading opportunities.

Some analysts also believe that other companies that work with the government (such as CACI International and Palantir Technologies) are also expected to benefit from the end of the shutdown.

In addition, expectations for more fiscal stimulus are prompting investors to reconsider so-called "currency depreciation trades," which is reversing the slight market valuation corrections seen recently.

However, the end of the government shutdown is not entirely positive for the U.S. stock market. During the shutdown, the lack of official inflation and employment data led investors to temporarily overlook the risks the Federal Reserve faces in maintaining employment and price stability. This is a two-sided risk. If some economic data, especially employment data, are drastically different from the information the market previously relied on, it could be positive or negative.

This Senate compromise agreement did not extend subsidies for the Affordable Care Act (ACA), which has been one of the main points of contention between Democrats and Republicans. This led to sharp declines in the stock prices on Monday for insurance companies participating in government healthcare programs, such as Centene and Molina Healthcare. Both sides are expected to continue negotiations on funding due to expire at the end of the year, but nothing is guaranteed yet.

Additionally, U.S. stocks still face multiple other pressures, including high valuations, concerns about the health of the American consumer, and sector-specific pressures in areas like healthcare. However, many Wall Street strategists still believe that as uncertainty over government spending eases and market sentiment marginally improves, the overall market still has upside potential.

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