November Market Review: Navigating Volatility and Economic Uncertainty

Sean Gross, CFP®, AIF® | Co-Founder & CEO

November brought a temporary surge in market volatility that rippled across numerous asset classes. Despite solid year-to-date gains in stocks, bonds, and international markets, concerns about artificial intelligence stocks and Federal Reserve policy direction weighed on investor sentiment. The government shutdown further complicated the economic picture by postponing critical data releases, making it harder to assess the economy's health.

Many asset classes recovered and stabilized as the month concluded. This pattern reinforces a crucial lesson for long-term investors: maintaining a flexible, well-balanced portfolio designed to weather market fluctuations is essential. Achieving investment success means keeping sight of long-term objectives rather than responding to headlines or pursuing short-term trends.

What factors influenced November's market movements, and how should investors approach the final weeks of the year?

November's Primary Market and Economic Developments

• The S&P 500 edged up 0.1% for November, while the Dow Jones Industrial Average added 0.3% and the Nasdaq slipped 1.5%. Through year-end, the S&P 500 has advanced 16.4%, the Dow has climbed 12.2%, and the Nasdaq has surged 21.0%.
• The VIX, which measures stock market volatility, closed at 16.35 after spiking to 26.42 during the month.
• The Bloomberg U.S. Aggregate Bond Index increased 0.6% in November and has delivered 7.5% returns year-to-date. The 10-year Treasury yield concluded November at 4.02%, temporarily dipping below the 4% threshold.
• International developed markets, measured by the MSCI EAFE Index, rose 0.5% in U.S. dollar terms, while emerging markets declined 2.5% according to the MSCI EM Index. For the year, the MSCI EAFE Index has returned 24.3% and the MSCI EM Index 27.1%.
• The U.S. dollar index finished at 99.46, briefly exceeding the 100 mark.
• Bitcoin dropped approximately 17% during November, closing at $91,176.
• Gold prices finished higher at $4,218, though remaining below October's record peak of $4,336.
• The delayed September employment report revealed 119,000 new jobs were created, while the unemployment rate increased to 4.4%. No October jobs report will be released.

A temporary shift away from risk assets

November witnessed a temporary retreat from risk assets including technology stocks, high-yield bonds, cryptocurrencies, and similar investments. Questions about the viability of AI-related investments and recalibrated expectations for Federal Reserve rate cuts drove this shift. The S&P 500 has experienced six pullbacks of 5% or more this year, the highest count since 2022 though still aligned with historical norms. Several major asset classes recovered in the month's closing days, pushing the S&P 500 into positive territory.

AI-focused technology stocks posted their weakest week since April during the month. Volatility emerged from concerns about spending levels, debt burdens, profit margins, and potential bubble risks. However, underlying fundamentals remained solid, with companies like Nvidia delivering robust third-quarter revenue and earnings growth. Several stocks, including members of the Magnificent 7, rallied following these earnings announcements.

Cryptocurrencies underwent a sharp correction during this risk-averse period. Bitcoin tumbled more than 30% from its early October peak above $125,000, briefly trading below $85,000 and erasing year-to-date gains. While cryptocurrency adoption has expanded among investors, such episodes highlight that these assets can be highly speculative and subject to dramatic swings. Maintaining proper asset allocation and implementing ongoing risk management remain critical considerations.

Bond markets advanced in November, supported by declining long-term interest rates as the 10-year Treasury yield temporarily fell below 4% again. This movement reflected revised expectations about government policy that could lead to lower rates over time. The Bloomberg U.S. Aggregate Bond Index has posted a 7.5% year-to-date gain, its strongest performance since 2020, helping to provide stability to diversified portfolios.

Government shutdown concludes amid lingering economic questions

The historic 43-day government shutdown came to an end, though federal funding only extends through January 2026. This timeline means political uncertainty will resurface in just a few months. Despite these challenges, markets generally looked past the shutdown, even as the absence of economic data created additional complications.

The Bureau of Labor Statistics published the delayed September employment report, originally scheduled for October release. Job creation that month surpassed forecasts, bouncing back from summer weakness. However, revised data revealed a loss of 4,000 jobs in August, marking the second month of negative employment growth this year. The unemployment rate climbed to 4.4% in September, its highest reading since October 2021, though this remains relatively low historically.

A complete October employment report will not be issued since household and business surveys were not conducted that month, though some data will appear with November's report on a delayed schedule.

Federal Reserve rate cut expectations have evolved

These data gaps mean the Federal Reserve will approach its mid-December meeting with an incomplete economic assessment. Market expectations for a rate reduction at the upcoming meeting have fluctuated significantly, with probabilities falling in mid-November before recovering. Current market-based projections suggest the Fed will implement a rate cut in December, followed by additional cuts in April or June 2026.

Additional economic indicators, including consumer confidence measures, have also deteriorated. The University of Michigan's Index of Consumer Sentiment preliminary reading fell from 53.6 to 50.3 in November. This decline reflects ongoing worries among Americans regarding employment prospects, elevated prices, and their overall financial well-being. While many households face financial pressure, weak sentiment in recent years has not resulted in decreased spending or reduced corporate revenues.

The bottom line? November's market fluctuations and persistent economic uncertainty serve as reminders that stock market volatility is a normal occurrence. Investors should maintain perspective as the year draws to a close.