High valuations and high volatility have gone hand-in-hand so far in November. Watch as Aya Yoshioka breaks down the latest market news this week, including increased investor interest in the healthcare and energy sectors. She also shares updates on expectations for the upcoming fed meeting, inflation, and more!

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TRANSCRIPT:

Hi, my name is Aya Yoshioka. I'm a Portfolio Consulting Director and Senior Investment Strategist here at Wealth Enhancement. Welcome to another edition of 7 Market Movers, where we cover a variety of topics that have impacted markets over the last week. So let's get started. 

After a record long 43-day government shutdown, lawmakers finally reached a deal to reopen federal operations. They agreed that they would have a short-term funding extension to fund most federal agencies through the end of January 2026, not too long from now. SNAP and food aid funding was restored, and there was a deferral on voting for tax credits, related to the Affordable Care Act. When news of all of this first broke, on Monday, stocks staged a relief rally as a major overhang was lifted. In the coming days and weeks, though, we will get several economic data releases related to jobs, inflation, GDP, and much, much more, and we'll get a sense of where the US economy currently stands. 

On that note, we aren't expecting too much of a change, in terms of the trends that were persistent prior to the government shutdown. And that includes inflation that was already staying very sticky in this 3% level and cooling or weakening, labor market. So we don't think we're going to see too many changes there, but markets will parse through all this economic data for both the delayed data as well as the current data as government agencies catch up to all of the information. We will then, as market participants, crystallize around what the probability of that December Fed cut will be. Right now, it currently stands at about 65% in terms of the probability that the Fed will cut again and do another 25 basis point cut. But again, that will crystallize and become more clear as we approach that next Fed meeting in December. 

We are on track for a 3rd consecutive year of double digit gains in the S&P 500. And yesterday, we saw the Dow Jones Industrial Average break through the 48,000 milestone. While the Dow is up 0.4% for the month of November so far, the S&P is actually down 1% and the tech heavy NASDAQ is down a little over 3% as stocks related to AI really do take a little bit of a breather. 

Equity markets are a little expensive here. The S&P 500 index is trading at a forward price to earnings ratio of 25x compared to a 5-year median of about 22x. And that's still expensive relative to the long term average of around 16x to 17x. And when valuations are high, volatility can get a bit more elevated, and we've seen that in November so far. The VIX index, an indicator of market volatility, is currently showing a reading of around 20. This is up from the low of 15 that was seen in August, but this compares to the heightened periods of volatility that we saw from the tariff tantrum in April where the VIX spiked to over 50 or the early days of the pandemic when the VIX spiked to 80. 

So this current bout of volatility, is it a sign that the AI bubble is deflating? We don't necessarily think so. Perhaps, right? There's been a lot of talk about the AI bubble, but this can be viewed positively overall as we see a little bit of a breather in markets. So we think that the AI build out is going to continue for quite some time, but it also happened with the internet as well. Sometimes investors get a little ahead of themselves. And we think that having a little bit of a pause in some of these names can be very healthy. 

And we're seeing a good rotation across markets into other areas that are seeing some valuation support. So areas such as healthcare and energy were unloved all throughout 2025. And they're starting to see some investor interest as people take some profits off the table in tech. They're not running away from the market overall. They're just leaning into some of that diversification, which we really think is crucial for investors to embrace when markets are elevated from a valuation perspective. 

With that, if you would like to discuss your portfolio, please reach out to a financial advisor here at Wealth Enhancement, and we'd be happy to discuss your portfolio or our market outlooks with you. Thanks so much for listening and have a great one.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances. Investing involves risk, including possible loss of principal.

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