Despite recent market volatility, a confluence of strong supportive factors—from fiscal policy optimism and monetary easing expectations to robust capital inflows from institutions and retail investors—has built solid downside protection, prompting investors to actively position for a year-end rally.

Early this week, markets received a critical bullish signal. News of the potential end to the U.S. government shutdown swiftly revived aggressive dip-buying strategies, reversing November's sluggish start. The resumption of economic data releases may strengthen bets on Federal Reserve rate cuts, providing additional fuel for bullish sentiment, according to reports.

At the core of market psychology lies traders' unwavering commitment to a year-end rally. Their bullish stance appears unshakable barring setbacks far exceeding recent turbulence.

JPMorgan's market intelligence team, led by Andrew Tyler, stated unequivocally: "We are buyers of this dip and maintain our tactical bullish outlook." They highlighted that government reopening would be the near-term catalyst—not only supporting current-quarter GDP forecasts but potentially unleashing more liquidity. Meanwhile, odds for another Fed rate cut in December are rising, while corporate buyback programs resume post-earnings quiet periods.

This convergence of positives is reshaping risk appetite and technical setups. Although some systematic funds recently reduced exposure, robust buying from retail investors and select money managers provided effective counterbalance. Option market activity hit record highs, displaying strong call bias amid contained volatility measures. Wall Street consensus suggests the runway for year-end gains is being paved.

Policy Tailwinds as Primary Catalyst For investors betting on a year-end rebound, Washington's positive developments serve as the primary stabilizer. Goldman Sachs partner Richard Privorotsky noted: "Government reopening is the prerequisite for market stability, with current odds suggesting it's imminent." He argued the implicit policy "put" outweighs technical market washouts.

This view finds broad institutional echo. JPMorgan identifies shutdown resolution as equities' biggest near-term boost. Spotgamma analysts consequently adjusted strategy: "With shutdown resolution clearly approaching, we've moved our S&P 500 risk appetite inflection point from 6900 to 6800," calling this a bullish week. Beyond fiscal support, Fed easing expectations provide additional stimulus, with traders pricing higher odds for December rate cuts than status quo.

NVIDIA Earnings in Spotlight, Buybacks Resume Beyond macro policy, corporate fundamentals—particularly tech giants' performance—form another critical pillar. NVIDIA's upcoming earnings report stands as a key test. JPMorgan's Tyler team suggests these results could alleviate AI theme concerns and validate strong revenue/EPS growth this quarter.

Clearly, NVIDIA's performance has become a crucial sentiment barometer. Tyler's team warned that disappointing results—combined with prolonged shutdowns, weak buyback execution or bond volatility spikes—would prompt them to abandon bullishness. Meanwhile, post-earnings buyback resumptions provide steady inflows, serving as another downside buffer.

Systematic Selling vs. Retail Buying Last week's correction revealed investor divergence. Deutsche Bank data shows overall positioning dropped to neutral, driven mainly by systematic fund de-risking across momentum, AI trades, crypto and heavily shorted stocks.

However, this selling pressure found counterbalance. Analysis reveals retail investors and select fund managers displayed stronger buying appetite, effectively absorbing systematic outflows. Nomura's Charlie McElligott noted volatility control funds alone dumped ~$117.8B in U.S. equities recently. He predicts meaningful re-allocation and buybacks if markets and megacaps maintain ±1% daily moves—potentially fueling fresh upside.

Technical Rebound, Call Activity Surges Monday's rebound restored bullish technical patterns. Despite last week's risk-off episode, multiple indicators remain robust. Option markets particularly stand out, with the one-month put/call volume ratio hitting record highs, signaling aggressive call positioning.

Moreover, volatility and hedging cost measures remain contained near summer levels, suggesting underlying confidence persists. Investors appear well-prepared for potential downside while keeping focus firmly on year-end opportunities.