Markets overcome mid-month pullback in November
A mid-month bout of volatility focused primarily on the AI tech giants gave way to a broader rally in November’s final days amidst renewed expectations the US Federal Reserve (Fed) will cut interest rates in the coming weeks.
The late surge pushed the S&P 500 and Dow Jones Industrial Average indexes into positive territory, though just barely, for the seventh consecutive month. The tech-heavy Nasdaq index was down slightly, ending a seven-month run. Performance for all three remains strong for the year.
Prior to the rally, the major US indexes experienced their first pullback of more than 5% in over six months. A prolonged lack of economic data stemming from the US government’s longest shutdown – it spanned 43 days until ending November 12 – as well as concerns for increased AI spending and waning rate-cut expectations contributed to the selloff.
“Pullbacks are common – and this one was short-lived,” Raymond James Chief Investment Officer Larry Adam said. “With the AI theme evolving, the Fed’s next move uncertain, and an economy straddling slowing growth and rising inflation, a pause was no surprise. Equity fundamentals look strong heading into 2026, but valuations in the 99th percentile point to near-term caution and heightened volatility.”
The yield for the 10-year Treasury was down 0.06%.
We’ll get into the details after we take a look at the numbers year-to-date.
|
|
12/31/24 Close |
11/28/25 Close* |
Change |
Gain/Loss |
|
DJIA |
42,544.22 |
47,716.42 |
+5,172.20 | +12.16% |
|
NASDAQ |
19,310.79 |
23,365.69 |
+4,054.90 | +21.00% |
|
S&P 500 |
5,881.63 |
6,849.09 |
+967.46 | +16.45% |
|
MSCI EAFE |
2,259.60 |
2,810.47 |
+550.87 | +24.38% |
|
Russell 2000 |
2,230.16 |
2,500.43 |
+270.27 |
+12.12% |
|
Bloomberg U.S. |
2,189.03 |
2,352.33 |
+163.30 | +7.46% |
*Performance reflects index values as of market close on November 28, 2025.
Spending drove AI scrutiny
The technology sector declined nearly 5% as AI investment spending and circular financing were closely examined during earnings season. However, estimates for earnings growth for the next two years are strong.
Fed members torn on next rate cut
The Fed’s position on monetary policy was murky after October’s 0.25% rate cut was announced. Fed members seemed split, with about half favoring a December cut and half preferring to keep rates where they are into the new year. Based on more dovish comments at the end of November, Fed Funds futures reflected a 99% likelihood of another 0.25% cut in December.
Shutdown ends, but Congress remains on the clock
Congress passed a bipartisan funding package to extend government operations through January 30, 2026. The fate of Affordable Care Act premium tax credits set to expire at year-end remains unresolved. The January 30 deadline creates a compressed window for Congress to negotiate and pass the nine remaining 2026 appropriations bills, raising the prospect of another shutdown by late January.
Labor data released following shutdown
Employment growth was stronger than expected in September according to the delayed release from the Bureau of Labor Statistics. Employment increased by 119,000 during the month but net growth was brought down by the negatively revised August number, leaving the possibility of two months of negative job creation and two months of positive job creation during the last four months.
China-US trade tension eases
In a November deal, US tariffs on Chinese goods were reduced by 10%, China’s October rare earth export controls were suspended, and elevated reciprocal tariffs were suspended for a year. China also agreed to suspend all retaliatory tariffs announced since March and committed to purchasing at least 12 million metric tons of US soybeans before year-end, with annual commitments of 25 million metric tons through 2028. Semiconductor tariffs remained delayed as the administration sought to avoid inflaming US-China relations.
A Russia-Ukraine peace deal could emerge
Diplomatic efforts picked up pace in November. The global economic impact of a deal would depend on the extent to which sanctions on Russia would be lifted, especially by the European Union. Even after the war ends, Europe is unlikely to return to its historical dependence on Russian energy.
The bottom line
After an impressive run, the major players in the AI space driving this year’s equity rally hit a patch of volatility in November. This is not unusual. Pullbacks are normal. In fact, given elevated valuations, periods of volatility may occur. The future of AI and the mega-cap companies that invest in it continues to look promising. For the long-term investor, the market outlook remains positive.
Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the Raymond James Chief Investment Officer and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. Diversification does not guarantee a profit nor protect against loss. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australasia and Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small-cap securities. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. An investment cannot be made in these indexes. The performance mentioned does not include fees and charges, which would reduce an investor’s returns. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. A credit rating of a security is not a recommendation to buy, sell or hold the security and may be subject to review, revision, suspension, reduction or withdrawal at any time by the assigning Rating Agency. Bond prices and yields are subject to change based upon market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. Income from municipal bonds is not subject to federal income taxation; however, it may be subject to state and local taxes and, for certain investors, to the alternative minimum tax. Income from taxable municipal bonds is subject to federal income taxation, and it may be subject to state and local taxes. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. The Consumer Price Index is a measure of inflation compiled by the US Bureau of Labor Studies. The Leading Economic Index (LEI) provides an early indication of significant turning points in the business cycle and where the economy is heading in the near term. Investing in small-cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks. The ISM Services Index is an economic index based on surveys of more than 400 non-manufacturing (or services) firms' purchasing and supply executives. The ISM Manufacturing Index, also known as the purchasing managers' index (PMI), is a monthly indicator of U.S. economic activity based on a survey of purchasing managers at more than 300 manufacturing firms. Material created by Raymond James for use by its advisors.
