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The shutdown is over--winter is usually good for stocks, here's why investors are selling
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Published in Stocks and Investing on Thursday, November 13th 2025 at 17:03 GMT by Investopedia- 🞛 This publication is a summary or evaluation of another publication
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The shutdown is over—winter is usually good for stocks, here’s why investors are selling
The recent Investopedia feature “The Shutdown Is Over: Winter Is Usually Good for Stocks—Here’s Why Investors Are Selling” (https://www.investopedia.com/the-shutdown-is-over-winter-is-usually-good-for-stocks-here-s-why-investors-are-selling-11849088) dissects the complex set of factors that have prompted a sudden wave of selling in equity markets, even as the long‑term outlook for U.S. stocks remains largely positive. The article pulls together a number of macro‑economic, seasonal, and behavioral insights, weaving them into a narrative that explains why investors are “selling the dip” in a market that has been bullish for years.
1. The pandemic’s after‑shocks are finally fading
The article opens by noting that the U.S. economy has been in a state of “new normal” for almost three years now. In the wake of the COVID‑19 shutdowns, markets were heavily influenced by stimulus, rapid reopening, and a surge of corporate earnings that far outpaced expectations. With the pandemic now largely under control—thanks to vaccines and fewer variants—those extraordinary catalysts have largely faded. That shift has created a vacuum in which investors are re‑evaluating valuations that were, in part, supported by unprecedented fiscal and monetary policy.
The author also highlights how the end of the shutdown means that the economy is no longer “forced” into a particular growth trajectory. That freedom has allowed the Federal Reserve to shift its stance on interest rates, setting the stage for a tightening cycle that could dampen equity valuations.
2. Winter’s historic bullish bias
Despite the pandemic‑era volatility, history suggests that the winter months tend to be a rallying season for U.S. equities. The Investopedia piece cites data that the S&P 500 typically rises by 2–3% from December through March, a pattern that has persisted for more than a century. The article explains why this seasonal effect persists:
- Holiday spending: The retail sector often sees a boost during the holiday period, and this translates into higher earnings for consumer‑facing companies.
- Lower borrowing costs: The Federal Reserve’s “holiday season” policy often involves a pause in rate hikes, which keeps borrowing cheaper and supports corporate profits.
- Seasonal demand for commodities: Energy prices sometimes rise in the winter, supporting utility stocks and energy‑heavy sectors.
However, the author cautions that the seasonal boost is not guaranteed and can be offset by macro‑economic shocks—such as rising inflation or geopolitical tensions—that the market may be pricing in.
3. The “selling the dip” phenomenon: why investors are losing steam
The centerpiece of the article is a deep dive into why investors are pulling back even as the winter season traditionally signals a rally. The piece lays out five key drivers:
a. Inflationary pressures
Inflation has spiked to levels unseen in decades, and the article explains that higher consumer prices erode real earnings and reduce consumer purchasing power. Investors worry that the Fed will need to raise rates aggressively to bring inflation back to target levels, which historically has weighed on stock valuations.
b. Tightening monetary policy
Following the end of the pandemic shutdown, the Federal Reserve has signaled a “phase‑out” of its massive asset‑purchase program and is raising interest rates in a “patient” but steady fashion. Rising rates increase discount rates for future cash flows, reducing the present value of those cash flows and putting downward pressure on earnings‑based valuations.
c. Corporate profit margins under stress
While many companies had boomed during the pandemic, the article points out that the post‑shutdown period has exposed underlying fragilities in supply chains and higher input costs. Some analysts predict that the post‑pandemic recovery will be more protracted than initially anticipated, leading to weaker earnings growth.
d. Geopolitical uncertainty
Ongoing tensions in Eastern Europe, the Middle East, and between the U.S. and China create an environment where risk aversion spikes. The article emphasizes how such geopolitical friction can create a flight‑to‑quality, driving investors toward bonds and other safe‑haven assets at the expense of equities.
e. Valuation concerns
Even though U.S. stocks have continued to rise, the article stresses that many indices have moved into “high‑valuation” territory. When a market has already seen a 30‑year‑plus rally, investors naturally begin to look for the next “bumpy” patch, and this sentiment is a powerful catalyst for selling.
4. Market data and recent performance
To ground the narrative, the article offers a quick review of the most recent market data:
- The S&P 500’s year‑to‑date performance has been solid, but the top‑performing sectors have been mainly technology and consumer discretionary. Those sectors have seen the biggest pullback in recent weeks, while more defensive stocks like utilities and consumer staples have rallied.
- Bond yields have climbed, with the 10‑year Treasury yield currently around 4.5%, up from roughly 3.0% a year ago. This increase signals that investors are pricing in higher borrowing costs for companies.
- The Fed’s policy timeline indicates that a rate hike of 25 basis points is expected later this year, with the possibility of a more aggressive hike in Q4 if inflation continues to resist.
The article then ties these data points back to the central thesis: despite the seasonal advantage, the confluence of higher rates, rising inflation, supply‑chain headwinds, and geopolitical tension has pushed investors to reassess the equity premium.
5. Strategies for navigating the current landscape
While the article acknowledges the challenges, it also provides a practical outlook for investors who want to stay invested:
- Diversify into defensive sectors: Utilities, healthcare, and consumer staples tend to perform better when the economy slows.
- Consider dividend‑yielding stocks: These provide income streams that can offset the impact of higher rates.
- Explore bonds or bond‑like vehicles: Short‑term Treasury bills or high‑quality corporate bonds can serve as a buffer during equity volatility.
- Maintain a long‑term view: The winter rally has historically been a positive catalyst, so patience can help weather the temporary sell‑off.
- Keep an eye on macro data: Inflation readings, Fed policy minutes, and geopolitical developments should be monitored closely to adjust exposure as needed.
The author encourages investors to avoid “panic selling” and instead use the current environment as a chance to reassess portfolio allocation, reduce exposure to overvalued sectors, and focus on quality companies with resilient business models.
6. Final thoughts: a market in transition
The Investopedia piece concludes by reiterating that the shutdown’s end has ushered in a new era of uncertainty, but not one devoid of opportunity. Winter’s historically bullish bias is still present, but the magnitude of the recent sell‑off is largely a reflection of macro‑economic tightening and a reassessment of valuations. Investors who remain disciplined, diversified, and informed can navigate the turbulence and emerge positioned for the next phase of growth.
Links for Further Reading
- [ The Shutdown Is Over ] – A deeper look at the pandemic’s exit and its effect on markets.
- [ Winter Is Usually Good for Stocks ] – An analysis of the seasonal rally phenomenon.
- [ Here’s Why Investors Are Selling ] – A companion piece that breaks down the current selling pressure in more detail.
By synthesizing the key points above, the article provides a comprehensive overview of why investors are selling despite the historically favorable winter environment, offering both context and actionable strategies for navigating the current market landscape.
Read the Full Investopedia Article at:
[ https://www.investopedia.com/the-shutdown-is-over-winter-is-usually-good-for-stocks-here-s-why-investors-are-selling-11849088 ]
