Today’s Trade

When we look at the data on government spending to avert things like shutdowns we do see an interesting pattern.

Short-term reaction (1-3 trading days): Estimated return: +0.5% to +1.2% Probability of positive return: 80% Rationale: Markets often react positively to reduced uncertainty. The removal of shutdown risk typically provides a short-term boost.

Medium-term performance (5-10 trading days): Estimated return: +0.8% to +1.5% Probability of positive return: 70% Rationale: The initial relief rally often continues, but can be moderated by other economic factors.

Sector-specific reactions:

• Government contractors: +1.5% to +2.5%

• Defensive sectors (e.g., utilities): -0.2% to +0.3%

• Cyclical sectors (e.g., financials, industrials): +1.0% to +2.0%

This is why yesterday’s dip was interesting, with all the FED commentary and government spending, and why we managed to see some overnight upside. That said, there are some interesting data points continuing through the end of the week, such as more FED commentary and PCE data.

Therefore, this is the ideal trade setup for today, leading into tomorrow.