For the period November 1 – November 30, 2025.

Executive Summary

Markets oscillated in November as investors debated two issues: The likelihood of a December Fed rate cut and the current state of the AI revolution. Although market volatility was heightened during the month, November was a time of digestion rather than disruption.

What Piqued our Interest

The Government Restarts

The longest government shutdown on record, lasting 43 days, came to an end on November 13. Despite the reopening, not everything is back to normal, especially when it comes to economic data releases. During the shutdown, releases were either canceled or delayed, and, importantly, no new statistics on prices or jobs were collected, leaving policymakers and investors with a data gap. Some alternative data has been used to fill the gaps, but official government data will still carry weight when released. While there continues to be debate over how much the shutdown impacted the economy, the stock market mostly shrugged it off. 

The K-Shaped Economy and Fed Policy

Views on spending, affordability, and economic growth vary depending on who you ask and what data you look at. The varying growth rates resemble the letter K, where some segments are seeing growth while others are seeing slowing. Recent data from the Fed’s Beige Book, a report that gathers anecdotal evidence on current economic conditions, showed that higher income spending was strong but lower and middle-income households were seeking more discounts and promotions. We see bifurcation from a sector standpoint as well, where spending remains robust by companies in the Technology sector, especially those that are tied to AI. On the other hand, other sectors such as manufacturing, residential construction, and trucking are struggling and pulling back on hiring.

The Fed will meet for its final meeting of 2025 on December 10 and markets are expecting another 0.25% cut, which would bring the target Fed Funds rate to 3.50-3.75%. As usual, investors will be focused on the forward guidance and accompanying commentary more so than the rate cut itself. If inflation risks are expected to linger, markets may need to digest and recalibrate the pace of expected cuts in 2026.

The AI Debate

The debate surrounding whether we are in an AI bubble raged on during the month, especially as investors wrestled with lofty valuations and a slight shift in how the build-out for AI would be financed. Thus far, Mega Cap Tech companies with great balance sheets and strong operating cash flows have been doing the heavy lifting, but the last few months have introduced some incremental debt issuance that brought back fears of a dotcom era bust. For many Technology companies, the risk is spending too little, falling behind, and missing out on the next big shift in computing. 

For investors, the risk is that the companies they have invested in have poor returns on this invested capital. It is a concern because the future monetization of AI is not yet concrete and competitive dynamics for many AI models and platforms can shift rapidly. In November, the markets paused and digested the new narrative, but most investors remain cautiously optimistic.

Market Recap

Image

Equities Oscillate

Volatility was elevated during November, but the S&P 500 Index saw a late recovery heading into the Thanksgiving holiday. Growth stocks, heavily concentrated in the Tech sector, weighed on returns. The Technology sector in the S&P 500 Index declined -4.3%, and the Growth-oriented Nasdaq 100 Index declined -1.5% for the month. U.S. Large Cap Value stocks outperformed during the month, up 2.7%, but are still behind Growth stocks on a year-to-date basis.

U.S. stocks grab a lot of attention, but this year ex-U.S. returns are outperforming. Emerging Market stocks pulled back by -2.4% during the month, but the MSCI Emerging Markets Index is up close to 30% for the year. Developed International stocks aren’t far behind, posting a positive 0.6% return in November and taking the year-to-date return to 27.4%.

Fixed Income Markets Remain Stable

Lack of economic data, numerous Fed governor speeches, and speculation surrounding who the next Fed chair would be kept the bond market active, but returns were steady in fixed income during the month of November. The 10-year Treasury yield declined, ending the month with yields near 4.0%. The Bloomberg U.S. Aggregate Bond Index rose 0.6%, while the high-yield index posted similar gains. In municipals, there is anticipation that new issue supply will be short of demand, providing a tailwind into December, where returns have historically been positive, averaging returns of 0.54%.

Wealth Enhancement Perspective

November reminded us that narratives can change quickly. Concerns over AI and Technology stock valuations, alongside cautious Federal Reserve governor speeches, gave way to renewed excitement around improved AI models and growing confidence in a December rate cut. While fundamentals remain constructive, sentiment shifts can occur and impact short-term returns. 

For long-term investors, this is a time to stay disciplined, diversified, and opportunistic. Portfolio maintenance may not be high on a Holiday to-do list, but it can be a time to rebalance portfolios that may have drifted away from initial allocations, tax-loss harvest to offset gains, and selectively deploy cash to assets that can help you reach your objectives.

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.

2025-10226