Wall Street broke through fear this week as markets surged despite a blackout to parts of the world’s trading system, according to Bloomberg.
A month filled with stress over speculation and soaring AI prices quickly turned into a broader rise in risks. Stocks, bonds, Bitcoin and commodities all rallied during the normally quiet Thanksgiving week. This time, the transaction remained busy from start to finish.
Cryptocurrency moved with speed. Bitcoin has risen more than 7% since its November lows. Stocks that were heavily shorted also rose at the same time. Volatility in meme stocks and junk bonds has declined.
Gold and silver rose as traders bet more on a Federal Reserve interest rate cut in December. Positioning across stocks and commodities has turned risk-on again. Alphabet Inc. gained momentum by releasing a new AI model. This calmed nerves about Big Tech spending and maintained focus on US assets.
Risk appetite does not decline even if exchanges are suspended
Even an unusual trading halt could not halt the rally. On Friday, a data center cooling system failure forced the Chicago Mercantile Exchange to suspend futures and options trading related to stocks, interest rates and commodities.
This outage lasted longer than a similar outage in 2019. A major contract went offline during an active trading window. Although other exchanges absorbed some of the order flow, this failure demonstrated how dependent modern market activity is on a single technological system.
Price trends remained steady even during the suspension. Reluctant investors who remained exposed to tech-heavy benchmarks were once again rewarded. The S&P 500 rose 3.7%, its highest week in six months.
Leveraged inverse vehicles that track indexes have fallen more than 80% this year amid bearish trading. Tail risk protection remained mixed. The Cambrian Tail Risk ETF remains slightly positive in 2025, but defensive strategies have lagged far behind the speed of the rebound.
“The lesson of this week is that ‘don’t fight the Fed, don’t fight AI’ remains the market mantra,” said Emmanuel Cau, a strategist at Barclays.
While concerns about an AI bubble have eased, the overall market, led by stocks and liquidity, has recovered on the back of a possible Fed rate cut in December. ”
The Ministry of Finance also joined the movement. The two-year bond yield fell to about 3.5% as traders increased bets that interest rates would fall next year.
Bitcoin is back above $90,000 after falling 30% earlier this month. The Bloomberg Commodity Index rose more than 2% for the week. Spot Silver achieved a record while on the road.
Fed rate cut bet boosts flows and crushes short sellers
Even when fear peaked at the beginning of the month, the influx into risk did not completely stop. The CBOE Volatility Index hit its highest level since April just two weeks ago on valuation concerns and doubts about the labor market. Nevertheless, funds continued to flow into risk assets.
The Vanguard S&P 500 ETF, currently worth $820 billion, is on track for another year of record inflows. Investors sent about $125 billion to the fund in 2025. The ETF is up 17% this year.
Fundamental bets on U.S. Treasuries have returned nearly 7% so far this year, marking the strongest annual run in government debt since 2020. Junk bonds are back on the rise. The iShares iBoxx Dollar High Yield Corporate Bond ETF rose nearly 1% this week as investors moved away from riskier credit.
Short sellers suffered heavy losses. Goldman Sachs Group Inc.’s basket, which tracks the most shorted stocks, is up 28% this year. The ETF, which pays three times the dividend of the U.S. stock market, has fallen about 84%.
Volatility has fallen across asset classes. Indexes that track price changes in investment-grade credit and junk bonds both fell this week.
“For the decline in equities to become sustained and meaningful, it will likely require some reinforcement, and given the liquidity situation and global changes, it will require an even more significant level of concern about the economy,” said James Athey, portfolio manager at Marlborough Investment Management.
This change in tone was driven by a growing belief that policymakers were moving towards more accommodative conditions. Kevin Hassett, who chairs the White House National Economic Council under President Donald Trump, has emerged as the frontrunner to become the next Fed chairman.
Current Fed Chairman Stephen Milan reiterated his view that the U.S. economy needs major interest rate cuts. Economic indicators showing weakness in the labor market have added weight to expectations that the central bank will cut interest rates in December.
