November interrupted the year’s steady advance, not with a decisive shift in fundamentals but with a bout of volatility that exposed the market’s growing sensitivity to policy expectations and valuation. Equities broadly stalled as investors balanced incomplete US data from the government shutdown, renewed uncertainty over the Federal Reserve’s December decision and a sharper debate over whether AI-driven capital expenditure can continue to justify elevated multiples. Defensive sectors reclaimed leadership while technology, for the first time since spring, showed signs of fatigue as concerns about an AI bubble resurfaced.
Macro indicators, however, offered little sign of deterioration. In the United States, softer labour-market readings and a surprisingly weak consumer-confidence print contrasted with robust third-quarter earnings and stable inflation dynamics, leaving the market oscillating between hopes for near-term easing and fear that the Fed might delay cuts after all. Europe benefited from resilient financials and less exposure to megacap technology, although fiscal tensions in Germany tempered gains.
Inflation continues to cool and, with growth holding up and central banks indicating that rates have peaked, the global backdrop remains fundamentally stable. What unsettled markets in November was not a shift in direction but a reset in confidence, as rising valuations and less policy clarity made sentiment swings more capable of disrupting momentum.
Equities
Global equities lost momentum in November as the rally’s most crowded themes finally met resistance. The MSCI World Index rose only 0.3% as investors reassessed lofty valuation premia in technology and rotated toward defensives amid a choppier macro backdrop. The month’s performance revealed a market still supported by strong earnings but increasingly sensitive to shifts in policy expectations and the rising question of whether AI-related profits can keep pace with capital expenditure.
In the United States, the S&P 500 edged up just 0.2%, its narrowest monthly gain since April, while the Nasdaq fell 1.4%, snapping a seven-month streak as concerns about an AI bubble and heightened valuation scrutiny outweighed another robust quarter of earnings from megacap leaders. Strong revenue and margin trends across the broader US market underscored solid corporate health with 81% of S&P 500 constituents beating expectations. However, the response was muted, reflecting how much good news is already priced in.
Europe fared somewhat better. The Stoxx 600 gained 1.0% and financials once again provided stability, supported by resilient earnings and a modest steepening in yields. The UK market advanced 0.4%, constrained by softer industrial sentiment and waning momentum in consumer-related earnings. Japan outperformed most developed markets with a 1.4% rise, as yen weakness continued to support exporters even though domestic bond volatility signalled caution over the policy mix.
Emerging markets, by contrast, struggled. The MSCI EM Index declined 2.4%, driven by steep losses in Korea and Taiwan, down 3% and 4% respectively in USD terms, as investors locked in profits after a strong year and reassessed the sustainability of AI-linked earnings expectations. China remained subdued, with sentiment dampened by weaker cyclical signals and renewed scepticism around the durability of its recovery.
Fixed Income
Fixed income markets navigated November with a similar blend of support and unease, though the month’s quiet headline returns masked meaningful shifts beneath the surface. The unresolved distortions from the US government shutdown complicated the macro picture, leaving investors to parse incomplete labour-market data and mixed consumer signals while recalibrating expectations for a December Federal Reserve cut. By month-end, US Treasuries were the strongest major segment, returning +0.6%, with the 10-year yield declining and duration regaining its defensive role as markets priced an increasing probability of near-term easing.
Performance across regions diverged more sharply. Japanese government bonds delivered one of the weakest returns with -1.3%, as markets questioned how long the combination of expansive fiscal spending and a still-accommodative Bank of Japan stance could coexist alongside a depreciating yen and rising inflation pressures. In the UK, Gilt returns were essentially flat at +0.1%, reflecting the tension between moderating inflation and uncertainty around the budget, which ultimately landed without the fiscal shock some investors had feared. In the euro area, Bunds underperformed as higher-than-expected net borrowing projections weighed on sentiment, while inflation-linkers rose modestly by 0.2% despite duration headwinds outside the US.
Credit markets absorbed the month’s volatility with mixed resilience. US high yield delivered +0.2%, supported by carry even as concerns about the labour market and refinancing pressures persisted. Euro high yield was flat, while global investment-grade spreads remained broadly stable despite rising issuance expectations tied to AI-related capex among large corporates.
Commodities and Currencies
Commodities were mixed in November, with performance shaped more by shifting positioning than by changes in underlying demand. Brent crude fell another 2.9%, marking a fourth consecutive monthly decline as expectations of an emerging supply surplus continued to weigh on energy prices. Precious metals, by contrast, remained firm: Gold rose 5.9% and Silver surged 16%, supported by softer US yields and renewed demand for defensive hedges amid heightened equity volatility. Bitcoin, however, was among the weakest performers with -16.7%, hit by a sharp mid-month selloff during the broader risk-off shift and its tight correlation with US tech.
Currency markets reflected the same cautious recalibration. The US Dollar traded sideways, softening at the margin as markets moved back toward pricing a December Federal Reserve cut. The Euro held within a narrow range, while the yen weakened for a third consecutive month, down 1.4%.
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