Market Analysis: Government Shutdown End Boosts Stocks with S&P 500 Targeting 7,000 Points

This analysis is based on the Barron’s report [1] published on November 12, 2025, which highlighted that the end of the U.S. government shutdown would provide a boost to stocks, with the S&P 500 having a 7,000-point target in sight. The report identified Federal Reserve policy and inflation concerns as two key factors that could potentially halt the rally [1].

The market response to the shutdown resolution was immediate and positive, with the Dow Jones Industrial Average surging to new all-time highs, gaining 239.03 points (+0.50%) to close at 48,254.82 on November 12, 2025 [0]. The S&P 500 showed resilience near recent highs, closing at 6,850.92, down 0.25% on the day [0]. Stock futures had pointed higher earlier in the session, reflecting shutdown end optimism [2].

The 43-day government shutdown had significant economic implications, including the Federal Housing Administration stopping housing loan approvals and the Small Business Administration ceasing new business loan processing [3]. Congress moved to end the shutdown through a legislative package that also included a ban on hemp products containing more than 0.4 mg of THC [4].

The S&P 500’s 7,000-point target represents approximately 2.2% upside from current levels (6,850.92) [0]. This target aligns with recent market momentum, as the index gained 0.45% on November 11 and 0.69% on November 10 [0]. The target is within established trading ranges, given the index’s 52-week high of 6,897.70 [0].

The market faces significant uncertainty from Federal Reserve policy decisions. While 80% of economists predict a 25 basis point Fed rate cut in December, FOMC members remain divided on the decision [5]. Goldman Sachs Research also forecasts a December cut and expects two additional 25-basis-point cuts in March and June 2026 [6]. However, Fed Chair Powell noted that a December cut is “not a foregone conclusion” [6].

Personal Consumption Expenditures (PCE) index has remained above the Fed’s 2% target for more than four years, the longest streak since 1995 [5]. Inflation is expected to average above 2% through 2027, challenging accommodative policy [5]. This persistent inflation creates a complex backdrop for the Fed’s decision-making process.

Current sector performance reveals significant divergence: Communication Services led with +1.38%, while Technology underperformed with -0.81% [0]. This suggests ongoing sector rotation patterns, with investors potentially shifting from growth to defensive or value-oriented sectors.

The analysis reveals several risk factors that warrant attention [0]:

1. Federal Reserve Policy Uncertainty
   : FOMC division on December rate cuts could create market volatility, particularly as the meeting approaches [5]. The combination of persistent inflation above target levels and limited economic data due to the shutdown complicates the Fed’s decision-making process [5].

2. Government Shutdown Aftermath
   : Backlog in federal permits, licenses, and regulatory approvals could create short-term disruptions [2]. Delayed economic data releases may lead to market misinterpretations until the data flow normalizes [2].

3. Market Technical Considerations
   : The S&P 500 approaching 7,000 target may trigger profit-taking, while Technology sector underperformance could signal broader growth concerns [0]. High valuation levels (SPY P/E ratio of 28.86) may limit upside potential [0].

The end of the shutdown creates several opportunities:

• Relief rally characteristics, particularly benefiting sectors directly impacted by shutdown uncertainty [2]
• Return of economic data releases will provide the Federal Reserve with necessary insights for policy decisions [2]
• Potential for continued market momentum if Fed policy remains accommodative

The market is experiencing a relief rally following the end of the 43-day government shutdown, with the S&P 500 targeting 7,000 points [1]. The Dow Jones reached new all-time highs (+0.50%), while the S&P 500 showed resilience near recent highs [0]. However, two major factors could halt the rally: Federal Reserve policy uncertainty and persistent inflation concerns [1].

The Federal Reserve faces a complex decision in December, with 80% of economists predicting a 25 basis point rate cut, but FOMC members remain divided [5]. Inflation has remained above the 2% target for over four years and is expected to average above 2% through 2027 [5]. This creates significant uncertainty for market participants.

Sector performance shows mixed sentiment, with Communication Services leading (+1.38%) and Technology lagging (-0.81%) [0], suggesting ongoing sector rotation. The market’s ability to sustain the rally will depend on Fed policy clarity, inflation trajectory, and the resolution of economic data backlogs from the shutdown period [2][5].