H.R.5371 Signed: Today's Market Reaction, Differences from Projections, and Short-Term Outlook

H.R.5371, signed by the President, ended the 43-day government shutdown that began on October 1, 2025. This continuing resolution extends funding through January 30, 2026, restoring operations across federal agencies. Previous projections anticipated short-term market relief based on U.S. Bureau of Economic Analysis and Federal Reserve historical data from prior shutdowns. However, today’s market performance diverged, reflecting profit-taking and external factors. Below is a comparison of actual outcomes to projections, explanations of variances with government-sourced insights, and data-driven expectations for tomorrow and the following week.

Comparison to Previous Projections and Today’s Market

Previous projections anticipated 1-2% gains in major indices post-resolution, drawing from resolutions like 2019 (1.5% S&P rise per BEA data). However, today’s close showed declines: S&P 500 down 1.6%, Dow Jones down 1.3% (over 600 points), Nasdaq down 2.5%, and VIX up around 4.5%. This contrasts with historical averages where S&P 500 gained 4.4% during shutdowns, but post-resolution can see initial volatility.

Why the Differences?

Profit-Taking in Tech: Stretched valuations and rate expectation shifts drove tech-heavy Nasdaq’s steeper drop, per Federal Reserve notes on post-disruption data releases. Unlike projected 0.5-1.5% tech uplift, actual 2.5% decline reflects broader rotation.
Missing Economic Data: Shutdown-delayed reports (e.g., GDP, employment per CBO) created uncertainty, exacerbating sell-offs despite resolution.
Broader Factors: Liquidity tightness and Treasury account refills absorbed market funds, per analyst reviews—not directly tied to shutdown but amplified post-resolution choppiness.

Potential Market Impacts Tomorrow and Next Week

Historical data from 10 prior shutdowns shows mixed short-term but positive longer-term trends: S&P 500 averaged 16.95% returns 12 months post-closure (since 1980), with gains in 3-6 months most cases. Expect choppy trading tomorrow due to data catch-up, but potential recovery next week as operations normalize, per BEA GDP rebound signals. Weekly losses from tech profit-taking may ease, with rotations favoring cyclicals.

Major Indices

S&P 500: Short-term volatility (0-1% fluctuation tomorrow), but 1-2% gains possible next week, mirroring 2.4% rise during 2013 resolution per historical analyses.
Dow Jones Industrial Average: Potential 0.5-1% rebound tomorrow, driven by industrial stability; historical post-shutdown averages suggest 0.7% daily jumps.
Nasdaq Composite: Choppy, with 0.5-1.5% swings; expect stabilization next week amid rate clarity, contrasting today’s 2.5% drop.
VIX Index: 5-10% decline over the week as uncertainty fades, per CBOE data from prior resolutions.

Key Sectors

Financials: 0.5-1% gains tomorrow from policy normalization, per Department of Commerce flows; historical +1-2% post-resolution.
Industrials: 1-2% uplift next week via contract resumptions, aligning with BEA recovery data.
Energy and Materials: Stable to +1%, supported by EIA supply chain stabilization.
Technology: Volatile tomorrow (0-1% down), but 0.5-1% recovery next week as valuations adjust, per Fed insights.
Healthcare: Neutral, with potential positive from subsidy flows per congressional extensions.
Defense: 1-2% gains over the week from DoD funding restarts, based on 2013/2018-2019 patterns.

Stay informed at Fortfolio.io for ongoing insights.

Disclaimer: This is informational only, not financial advice. Data from government sources; historical performance does not guarantee future results.

Join our Discord community

Get real-time strategies and support. Join Now