As the longest government shutdown in American history ended on 13th November, market reaction was quite negative. As soon as there were rumors of the reopening of the government, the market rallied and fell sharply as the news of the reopening came. As a result, high-beta, unprofitable AI and quantum companies were obliterated over the past week.
Companies such as Oklo, Palantir, Rigetti Computing, CoreWeave, and others have sharply sold off. Bitcoin, which briefly surged above 100k, also failed to find support on Friday, the 14th. Gold has been highly volatile as well, trading more like a risk-on asset: it tends to outperform the S&P 500 on up days, but underperforms on risk-off sessions like November 13th and 14th. Markets that were previously very optimistic were caught off guard, and the potential severity of the government shutdown is becoming increasingly evident as investors await jobs and retail sales data. Many retail-favourite stocks have fallen 30–50% from their all-time highs, even though their underlying business prospects have changed very little. It is somewhat ironic to see Oklo’s shares rise several hundred percent over recent months despite the company having no revenue. Quantum-computing companies show a similar pattern—minimal revenues paired with extremely high market capitalizations. This past week has become a moment of reckoning for significantly overvalued firms. Market behaviour has been unusual in recent weeks, largely due to uncertainty around the government shutdown, but this probably won’t mark the beginning of a broader downturn in the S&P 500.
Across the Atlantic, the German DAX has struggled, weighed down by the S&P’s pullback and the poor momentum in German industrial production. Chinese companies continue to gain market share in Europe while the EU responds slowly in a fast-moving global environment shaped by U.S. and Chinese executive decisions. German fiscal expansion has yet to produce tangible improvements in economic performance; instead, higher interest rates have simply increased borrowing costs. With Germany’s real GDP growth effectively stagnant and the DAX having appreciated significantly over the past year, the conditions may be forming for future underperformance. Valuation multiples have expanded despite a lack of earnings growth, and relative to the DAX, the S&P 500 is no longer as expensive as it was in 2023 or 2024.
Trading over the past month has been significantly more complex and marked by heightened uncertainty due to the absence of major U.S. economic data releases. Volatility is likely to remain elevated through the end of the year as multiple risks emerge: inflation may tick higher and influence the Fed’s December decision; the Supreme Court is set to rule on tariffs; the war in Ukraine shows no meaningful progress; and Germany continues to post deeply concerning industrial production figures. Market sentiment had been quite optimistic back in March when Germany abandoned its long-standing austerity approach in an effort to revive the economy. However, months later, there is still little to show for it, and tangible results remain elusive.
In summary, markets are entering a phase where elevated valuations, policy uncertainty, and weakening global data are beginning to clash with the optimism that dominated much of the year. While recent volatility may not signal the start of a full-scale bear market, it does highlight the fragility beneath headline indices. Overvalued sectors, persistent geopolitical risks, and disappointing economic signals—particularly from Europe—suggest that investors may need to prepare for a more uneven landscape. Until clearer direction emerges from U.S. economic releases, central bank decisions, and global policy developments, caution and selectivity are likely to remain the dominant market themes.