Will the Government Reopening Spark a Market Rally?

Join Jeff Praissman, host of the Interactive Brokers Podcast, and Scott Bauer from Prosper Trading Academy as they break down the market’s reaction to the government reopening. Will delayed economic data trigger a rally or reveal deeper risks for traders?

Summary – IBKR Podcasts Ep. 318

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Jeff Praissman 

Hey everyone, this is Jeff Praissman with the Interactive Brokers Podcast. It’s my pleasure to welcome back Scott Bauer from Prosper Trading Academy. Hey Scott, how are you? 

Scott Bauer 

Great, Jeff. How are you? 

Jeff Praissman 

I’m doing well, and I appreciate you swinging by the studio as you do a couple of Wednesdays a month for our five-minute market recap. There’s a lot going on, right? And as always, hopefully with an end in sight now that the Senate has passed the spending package. How are the markets handling this government shutdown, which has been the longest on record? With this new news we got—what was it, yesterday or the day before—are they expecting it to be over soon, or are they still hesitant? 

Scott Bauer 

To me, it really looks like traders and the marketplace overall are looking beyond this at this point. Yes, it will be over—whether it’s in the next couple of days or next week. And now that earnings season has pretty much come to an end, the focus is squarely on rates, the bond market, and what the Fed is going to do. So yes, I do think the market is already pricing in that the shutdown is behind us—again, whether that happens in the next day or two or next week. Now, they’re really looking ahead at the data points we’ve missed and how that can affect the Fed in December. 

Jeff Praissman 

That leads me perfectly to my next question. Obviously, in the news—and as it should be—a lot of the focus is on people not getting paychecks or aid that they need. And again, without being political, that’s absolutely hugely important. But I think what a lot of times maybe Main Street doesn’t quite know or see is that when the government reopens, we’re going to get a barrage of economic data released. In the meantime, economists are turning to other sources, like the ADP report, which indicated a loss of—I think it was 11,000 jobs in the private sector. Do you think we’re going to get a big move in the market either way? Could we get a big move positively if the government reports are better, or negatively if the reports are worse? What’s the feeling on that by the general market? 

Scott Bauer 

I think the market is looking at this and expecting some fairly sobering economic data coming out. I think we’re expecting the worst—maybe even a loss of jobs. I know that whenever the October non-farm payrolls come out, whether it happens this week or next week, the expectation is actually for a loss of 60,000 jobs. Goldman just came out and said they expect it to be 50,000. I think the data across the board is not likely to be what we would consider positive. But I see the market kind of pricing that in—I really do. So unless it’s really off-the-charts negative, I don’t think we’re going to see a big negative reaction in the marketplace. 

Jeff Praissman 

So almost, if anything, if it does beat expectations, then we could actually get another huge bump? 

Scott Bauer 

I really think that’s the case here. I think that’s what we’re setting up for. Just because—I don’t want to say the expectation is gloom and doom—but the expectations are for some pretty poor numbers out there. 

Jeff Praissman 

And I want to switch gears a little bit. How has the dollar held up over the past week, and where do you think it’s heading? 

Scott Bauer 

Last week, we rallied to the highest point we’ve seen since basically the end of July. It has edged lower a little bit over the last few days. And really, it’s coinciding now with expectations for what the Fed is going to do in December. With that probability—I think on the CME FedWatch tool—it’s now down to about 61–62%. So we’re seeing the dollar back off a little bit. Overall though, Jeff, we’ve seen this incredible run back up from where we were, and now there’s just a little unrest. There’s some uncertainty that’s keeping the dollar hovering around that magic spot of 100 or 1. I think the main driver of what happens over the next few weeks is what we see in relation to the 10-year auction and how that may affect what the Fed might do—and obviously all the data that’s coming out over the next several weeks. 

Jeff Praissman 

Got it. And Scott, I feel like we can’t go a podcast without talking about either AI or tariffs—or both. So I’ve got to ask: Is the market following the Supreme Court and the potential impact on whether Trump’s tariffs are legal or not? Or is it again a case where everyone’s just kind of “it is what it is” and we’ll ride with it either way? 

Scott Bauer 

I do think when I talk to traders on the floor, it’s “it is what it is.” But when you look a little deeper—and boy, a year ago we probably would’ve never used this—when I look at Kalshi, they’re saying that right now there’s only slightly over a 20% chance that the Supreme Court is going to uphold the tariffs. So considering how brutal that selloff was back in April when the tariffs were first announced, we could see a positive reaction if that happens. I would be a little cautious though. I don’t think the answer is quite so simple here because the bottom line is the economic impact of these tariffs is still largely unknown. Was it overstated? Is it understated? So I think the initial reaction would be a little bit of a buy in the marketplace—not sure I would necessarily buy into that. 

Jeff Praissman 

Yeah, I agree. And it’s funny you mention Kalshi because obviously we have our Forecast Trader contracts as well. Without going too much on a tangent, that sector’s really grown as far as the market using it as market data too. 

Scott, this has been great. Love you coming by for our Wednesday chats, and we’ll see you next week. For our listeners, you can get more from Scott at prospertradingacademy.com. You can also visit our website to see past podcasts, articles, and more. Thanks again, Scott. 

Scott Bauer 

Thank you, Jeff.