November was an atypical bumpy ride that witnessed the indices go nowhere. The Technology sector retreated, giving back gains from September and October. The market oversold, and the rally began just before the shortened holiday trading week. The NASDAQ composite regained almost three quarters of its pullback.
Trading in concentrated holdings from hedge funds distorted price action negatively. Investment managers compounded these trading moves, aggressively adding to the downside. The impact on the broader market was felt through the largest Technology names.
November also rotated in leadership, as Healthcare (+9.57%), Communication Services (+7.98%), Materials (+4.06%) and Consumer Staples (+3.92%) were sector winners. Technology (-5.63%), Consumer Discretionary (-2.62%) and Industrials (-1.18%) recoiled. AI fatigue and worries about power generation for AI support contributed to volatility.
S&P 500: Nov +0.13% YTD +16.45%
DOW: Nov +0.32% YTD +12.16%
NASDAQ: Nov -1.51% YTD +21.00%
Russell 2000: Nov +0.73% YTD +12.12%
Sector Performance YTD:
Communication Services +33.83%
Consumer Discretionary +4.59%
Consumer Staples +3.34%
Energy +4.85%
Financials +10.09%
Healthcare +14.26%
Industrials +16.39%
Technology +23.67%
Materials +6.29%
Real Estate +2.51%
Utilities +19.02%
Current U.S. Treasury Rates:
6 Month Bill 3.69%
2 Year Note 3.52%
5 Year Note 3.67%
10 Year Note 4.09%
30 Year Note 4.75%
The Economy and the Fed:
According to ADP, private employers cut 32,000 jobs in November. Paired with announced upcoming layoffs before year-end, job cuts will top over one million in 2025. Various Fed members expressed concerns over labor market risks. The U.S. economy is slowing, but current GDP (3.8% annual growth rate) is consistent with historical long-term growth trends. PCE (Personal Consumption Expenditures Price Index) came in lower for September than forecast at 2.8%. The Fed primarily uses this index for their inflation gauge. This is all bullish for a Fed rate cut this month.
Fed Chair Powell’s term ends in May 2026. The next candidate will need to deal with a divided board of governors. Not all see rate cuts as necessary. Moving on from Powell is viewed positively on Wall Street. As well, Treasury Secretary Bessent rightly points out the need for a reformed Fed. Not the Fed’s mandate, but the implementation and rhetoric surrounding each meeting. Less talk and more transparency.
Looking Ahead:
Q3 earnings are essentially finished. Earnings growth has printed at 13.4%. This is the fourth consecutive quarter of double-digit growth. 83% of S&P 500 companies reported earnings above estimates. The 10-year average is 75%.
Data collected from recent holiday shopping reinforces that the consumer is still spending. Retail companies such as Macy’s, American Eagle, Ulta Beauty and Dollar General have reported excellent quarterly numbers, supporting the consumer strength narrative. Healthcare and Biotechnology have begun to perk up. Financials continue to prove positive and will benefit from less restrictive banking regulations and lower rates.
All things AI and power generation will be front and center for investors. Nonetheless, the market has broadened out away from the Magnificent Seven. Volatility will persist, but the bias is to the upside. We remain long large-cap growth and value equities (U.S. centric), with cash on hand. We are constructive into year-end and into 2026.