2025-11 Global DM Monthly Recap

Market Narrative

Macro

The November 2025 macro narrative was characterized by a complex and divided picture. On one hand, S&P 500 companies delivered a strong Q3 earnings season, with FactSet data showing a year-over-year earnings growth rate of 13.4% and record-high net profit margins. On the other hand, growing macroeconomic headwinds and valuation concerns dominated market sentiment. The core tension this month revolved around AI. The BofA FMS revealed extremely optimistic investor sentiment, with cash levels dropping to a "sell signal" of 3.7% and "long Magnificent 7" becoming the most crowded trade. Simultaneously, an "AI bubble" was identified as the biggest tail risk. This concern was validated mid-month when Nvidia's stock fell despite reporting better-than-expected earnings, reflecting persistent doubts about the return on AI investments. On the economic data front, signs of a slowdown in the US economy became more pronounced. Following the end of a record-long government shutdown early in the month, retail sales growth slowed to 0.2%, and consumer confidence dropped sharply as reported at the end of the month. Globally, Europe's economic growth remained sluggish. In China, after a brief rebound, the property crisis continued to deepen, with an unexpected 5.5% year-over-year decline in industrial profits for October, indicating waning economic momentum. Furthermore, GS's freight tracking reports consistently warned that the "pull-forward" effect of summer demand, driven by tariff uncertainty, led to a year-over-year decline of over -20% in China-US freight volumes for several consecutive weeks in November, signaling further weakness in near-term import data.

Policy

The core of the policy narrative in November was the divergence in expectations for major global central banks, particularly a significant shift in outlook for the Fed. Early in the month, hawkish comments from Fed officials suppressed rate cut expectations. However, with the release of weaker economic data and more dovish remarks from officials towards the end of the month, market expectations for a December rate cut quickly rose to nearly 70%. As highlighted in the BofA FMS, whether the Fed cuts rates has become a critical inflection point for the market's short-term direction. Meanwhile, the divergence in global central bank policy paths widened. The BoJ stood out as a key exception among major central banks. Amid persistent inflationary pressures and resilient economic data, market speculation about an imminent tightening of monetary policy intensified, pushing the 10-year JGB yield to a near-17-year high. In Europe, moderating inflation data led markets to increase bets on a rate cut from the BoE and suggested the ECB was nearing its policy target. On the fiscal policy front, the Japanese government approved a massive economic stimulus package worth JPY 21.3 trillion, while the UK announced tax hikes to consolidate its finances. Geopolitically, the end of the US government shutdown mid-month removed a major market uncertainty, and the "trade truce" reached between the US and China after the APEC summit temporarily eased trade tensions.