November Market Roundup: Volatility, Budgets, and Global Stimulus
November was a turbulent month for global markets, driven by renewed volatility and a growing sense of caution among investors. The main suspect: concerns over stretched valuations – especially in US large-cap technology and artificial intelligence (AI) stocks – after a strong run over the year. The fear is that price gains are running ahead of what companies can realistically deliver in earnings, prompting a re-rating of risk across equities. In the United States, the labour market has continued to cool. The unemployment rate rose to 4.4% in September and 119,000 jobs were added, suggesting that hiring remains modest for now. This weakening labour environment supported expectations that the Federal Reserve may consider further interest rate cuts – with markets now pricing in a likely cut in December.
Rachel Reeves’ long awaited budget leads to a muted market reaction
- After a prolonged wait, filled with rumours and leaks, Rachel Reeves delivered her budget to House of Commons. As widely expected, the announcement contained a series of tax hikes to the value of £26 billion in an attempt to plug the gap in public finances.
- However, in what could be seen as a ‘buy now, pay later’ budget, most of the tax increases are backloaded, and scheduled to take effect from 2028 onwards. With a general election expected in 2029, there is understandable scepticism over whether the proposed tightening will be implemented as currently planned.
- Office of Budge Responsibility (OBR) forecasts for growth were reduced with Gross Domestic Product (GDP) set to grow by 1.5% in 2025, 0.3% lower than projections in March, due to “lower underlying productivity growth.” At the same time the OBR forecast higher levels of inflation, believing it will reach 3.5% for 2025 – marginally higher than March’s estimate of 3.2%. It has also forecast an increase from 2.1% to 2.5% for 2026.
- One of the key points that investors can take from the budget is that nothing announced was considered to be inflationary in nature. This should leave the Bank of England’s interest rate plans relatively unchanged, with markets now pricing in the potential of a cut in December.
- The lack of surprises left equity markets relatively unmoved, and while Gilts edged slightly higher on the day, it was nothing revolutionary.
Has Donald Trump given a big hint as to his choice for the next Federal Reserve Chairman?
- Current Federal Reserve Chair, Jerome Powell’s, term comes to an end in May 2026, after what can be considered a fractious end to his time at the helm. Since the beginning of Donald Trump’s second term in office, he has been on the offensive against Powell, repeatedly berating him for not lowering interest rates fast enough. At times he has even threatened to fire him. To Powell’s credit, he has stood firm, and any potential for the Fed’s independence to come into question has been quashed.
- However, with President Trump confirming towards the end of the month that he has selected his preferred candidate to take over the position, markets are bracing themselves for more questions over Fed independence.
- While President Trump has not confirmed that his nominee will be Kevin Hassett, the current Director of the National Economic Council, recent reports suggest he is viewed within the administration as the frontrunner. Many now expect Hassett to be the President’s choice, with an announcement potentially coming before Christmas.
- It is believed that Hassett shares close alignment with Trump’s aggressive push for further monetary easing, which highlights why the administration are so keen on bringing him in as Chairman. This could lead to the downward pressure on interest rates that Trump has been longing for.
- This came hot on the heels of comments from senior Fed official, John Williams, in which he suggested that a softer labour market poses a greater threat to the economy than inflation, with investors taking this as a signal of an upcoming interest rate cut in December.
Fiscal stimulus makes headlines in both Japan and China
- Towards the end of the month, recently appointed Japanese Prime Minister, Sanae Takaichi’s government finalised a budget that contained a massive $135bn debt financed stimulus package targeted at stimulating growth in the country.
- Officials in China launched its latest attempt to stimulate domestic consumption, with a 19-point plan aimed at ‘hotspots’ including fitness equipment, pet food and supplies, civilian drones and trendy toys. The plan, which is due to run until 2030, was released by the Ministry of Industry and Information Technology and five other departments, targeted specific sectors to promote.
- The announcement from Chinese officials came amid signs that the country’s economy was losing momentum by the end of the third quarter. Retail sales rose by 2.9%, marking a fifth consecutive month of slowing growth, while industrial production increased by a weaker-than-expected 4.9% year-on-year in October. Fixed asset investment fell by 1.7% over the first 10 months of the year – the largest decline on record for that period, according to China’s statistics bureau.
In summary
For the first time since April, portfolio returns were marginally negative in November. After a strong six months, markets saw some investor nervousness return, and an understandable level of profit taking across sectors and regions that have seen some of the best returns in the preceding months. Global technology names suffered the heaviest falls, but the sector remains over 5% higher than it was at the start of October. UK large and mid-cap equities were marginally positive in November, with mid-cap stocks reacting more positively to the budget than their large-cap counterparts. However, both reactions were relatively muted.
The longest US government shutdown on record came to an end on the 12th November, as President Donald Trump signed a spending bill that will keep the government funded through to 30th January 2026. Despite the outcome, investors remained cautious amid questions on how long it will take for conditions to return to normal. One of the key concerns remains economic data, as the White House stated that the October jobs and inflation reports may not be released at all, and the Bureau of Labor Statistics (BLS) noted that “it may take time to fully assess the situation” regarding finalising data release dates.
In bond markets, the ten-year gilt fell back marginally over the month having started November with a yield of 4.41% and finished paying 4.44%. The equivalent ten-year US treasury offered 4.08% a month ago and pays 4.01% now with hopes of a December rate cut providing support. Japanese Government Bond (JGB) yields increased last month in response to announcements of the debt financed fiscal stimulus package and the Bank of Japan hinted at more rate hikes, with a 10-year JGB now paying 1.81%.
While November brought volatility and a range of economic and political headlines, it’s important to remember that markets naturally fluctuate. Short-term movements are normal, and maintaining a well-diversified, long-term investment strategy remains the most reliable way to navigate uncertainty.