Monthly Market Update – November 2025

Key Takeaways

• BROAD-BASED BUT MILD RALLY November 2025 was marked by a mix of volatility and cautious optimism as investors navigated the conclusion of the record-long US government shutdown, shifting monetary policy expectations, and growing scrutiny of Artificial Intelligence (AI)-driven valuations. Ultimately, most major asset classes advanced with emerging market stocks the only group seeing any material downside.
• THANKSGIVING WEEK FEAST From its late-October peak, the S&P 500 dropped -5.1% through November 21, marking its first 5% pullback since May. However, markets staged a powerful rebound during Thanksgiving week, with the S&P 500 gaining +3.7%. The rebound also extended across other asset classes, including bonds, commodities, and Bitcoin, creating one of the strongest synchronized cross-asset rebounds of the year.
• FED COMPLETES QUANTITATIVE TIGHTENING The Federal Reserve ended its balance sheet reduction in November after trimming another $37 billion, capping a total $2.43 trillion decline since its 2022 peak. This Quantitative Tightening unwound about half of the pandemic-era expansion, lowering the balance sheet to $6.54 trillion—the lowest since April 2020—while tightening financial conditions without further rate hikes.
• DIVIDEND YIELD IS LOWEST SINCE DOTCOM BUBBLE The S&P 500’s dividend yield has fallen to its lowest level since the dotcom bubble era, currently standing at around 1.1% at the end of November, driven lower by surging stock prices outpacing modest dividend growth amid high valuations, a preference for stock buybacks over dividend payouts, and the dominance of the low-yielding technology sector in the index. 
• SHUTDOWN MAY DAMPEN 4Q GDP BUT LIFT 1Q The record 43-day government shutdown ended on November 12 when President Trump signed a short-term funding bill. J.P. Morgan says it likely turned modest 4Q GDP growth into a slight contraction, with most lost activity shifting to 1Q-2026 for a delayed boost.
• RECORD OCTOBER BUDGET DEFICIT & INTEREST EXPENSE The federal government opened fiscal 2026 with the largest October budget deficit in US history, as rising spending and record interest costs overwhelmed strong revenues. Government spending and interest costs continue to grow and remain a threat to an otherwise favorable economic backdrop for 2026.

Market Summary

Asset Class Total Returns

Source: Bloomberg, as of November 30, 2025. Performance figures are index total returns: US Bonds (Barclays US Aggregate Bond TR), US High Yield (Barclays US HY 2% Issuer-Capped TR), International Bonds (Barclays Global Aggregate ex USD TR), Large Caps (S&P 500 TR), Small Caps (Russell 2000 TR), Developed Markets (MSCI EAFE NR USD), Emerging Markets (MSCI EM NR USD), Real Estate (FTSE NAREIT All Equity REITS TR).

BROAD-BASED BUT MILD RALLY

November 2025 was marked by a mix of volatility and cautious optimism across capital markets, as investors navigated the aftermath of the record-long US government shutdown, shifting monetary policy expectations, and growing scrutiny of Artificial Intelligence (AI)-driven valuations. Ultimately, most major asset classes advanced with emerging market stocks the only group seeing any material downside. Here’s a breakdown of the major developments across the US economy, equity markets, and fixed income markets.

US Economy: Uncertainty Amid Recovery

The US economy entered November under the shadow of a 43-day government shutdown—the longest in history—which ended mid-month. The shutdown delayed key data releases, leaving markets reliant on private indicators and nowcast models. Preliminary signals suggest moderate Gross Domestic Product (GDP) growth in the 2-3% range for 2025, supported by resilient consumer spending and concentrated investment in AI-related sectors. However, labor market conditions softened: unemployment ticked up to 4.4%, its highest since 2021, as job gains slowed and hiring became more selective. Inflation progress stalled, with tariffs exerting mild upward pressure, keeping headline Personal Consumption Expenditures (PCE) near 2.9% by year-end. Consumer sentiment diverged sharply—high-income households maintained spending, while lower-income groups faced mounting strain from elevated prices and borrowing costs. Looking ahead, forecasters expect a December Fed rate cut of 25 basis points, bringing the policy rate near 3.6% by year-end. However, that was not the case in the first half of the month when futures pricing for a December rate cut plummeted to just 25% odds, before sharply rebounding to a near certainty by the end of the month.

US Equity Market: Modest Gains, Leadership Rotation

After a volatile start, US equities eked out a +0.2% gain for the headline S&P 500 Index, marking the seventh consecutive monthly advance and leaving the index up +17.8% year-to-date. That overshadowed a sharp -5% mid-month pullback, driven by concerns over the Fed’s intentions for a December rate cut, the potential for an AI bubble and stretched stock valuations. But a +4.8% rally followed into month-end as expectations for a December rate cut surged following dovish comments by Fed policymakers that contradicted Powell’s early-November hawkish comments. As shown in the following charts, the S&P 500 almost perfectly traced the pricing of Fed Funds Futures for the December quarter point rate cut.

“What We’ve Got Here Is a Failure to Communicate”

Source: Duality Research, Bloomberg (top), Bloomberg (bottom).

November saw a distinct reversal in sector leadership. Technology (-4.3%) and Consumer Discretionary (-2.4%) lagged, while Health Care (+9.3%) and Materials led gains. Health Care hasn’t seen a better month since October 2022. Going into November, Technology was the top performing sector in 2025 with a 30% gain, while Health Care wasn’t even up +5%. Other 2025 trend reversals also occurred, including Value stocks outperforming Growth stocks by one of the second widest margins of the year, emphasizing the rotation away from mega-cap tech dominance during the month. The Russell 3000 Value Index outperformed the Russell 3000 Growth Index by +4.3%, the biggest gap since March’s +5.4% outperformance. It was only the second month in the last eight that Value exceeded Growth. You’d have to go back to July 2024 to find a wider discrepancy of Value over Growth, when it was 6.7%. Another contra-trend in November was the small-cap Russell 2000 Index outperforming the large-cap S&P 500, for just the third month this year. The Russell 2000 returned +1.0% in November for a +0.8-percentage point advantage over the S&P.

Non-US Equity Markets: Developed Markets Up Modestly, Emerging Markets Solidly Down

Developed international equities saw moderate gains in November, with the MSCI EAFE Index up +0.6%, led by Europe’s +1.6% return, while Japan was a laggard, falling -0.8%. Europe was supported by fiscal stimulus and optimism around trade agreements, while Asia was pressured from their Technology exposure and valuation headwinds. Emerging markets were under pressure as the MSCI Emerging Markets Index dropped -2.4% in November but maintained strong year-to-date returns of +30%. China and the broader emerging Asia Pacific region weighed on the index, with losses of -2.5% and -2.8% respectively. 

Fixed Income: Rates Ease, Credit Holds Firm

Fixed income markets delivered solid returns as Treasury yields drifted lower on growing confidence in disinflation and Fed easing prospects. The 10-year US Treasury yield declined -6 basis points to 4.01%, while short-term yields declined more sharply (the 2-year UST yield fell -8 basis points to 3.49%) steepening the curve. The broad US bond market, as measured by the Bloomberg US Aggregate Bond Index, returned +0.6% for a second straight month and was positive for a fourth consecutive month. Through November, the core bonds index is holding a +7.5% total return, which would be its best year since 2020. It was a broad-based rally for bonds, with all sectors of the US Aggregate advancing. Importantly, stress in the bond market remains low with investment-grade credit spreads (the difference between corporate bond yields and safer US Treasuries) sitting at record lows of +80 bps, and high-yield spreads are below +270 bps, also historically tight, amid strong fundamentals and muted defaults. On the other hand, Non-US bonds were negative for a second straight month, slipping -0.1% in November after losing -1.0% in October.

Source: Bloomberg. Data as of November 30, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

THANKSGIVING WEEK FEAST FATTENS VIRTUALLY ALL ASSET CLASSES

From its October 28 all-time high through November 21, the S&P 500 Index fell -5.1%, the first -5% pullback from record highs since May. But then Wall Street went on a bull market feast over the Thanksgiving holiday-shortened week. The S&P 500 jumped +3.7% for the week, increasing each of the four sessions of Thanksgiving week for the first time since 2016 on the way to its best Thanksgiving week since 2008, when it jumped +12%. It was the best S&P 500 November reversal in history, rising +4.8 since the November 20 low, to just close November positive. But it wasn’t just large cap US stocks that enjoyed strong performance in the final week of the month. The tech-heavy Nasdaq Composite and the small-cap Russell 2000 gained +4.9% and +5.5%, respectively. In fact, beyond stocks, assets of all stripes rebounded with force in the week, with bonds, commodities, and Bitcoin combining for one of the strongest synchronized cross-asset rallies of the year. The cross-asset rebound was the fourth best of the year and broke a four-week losing streak, the longest since March, in the weeks leading up to the tariff tantrum.

November Ended with an Everything Rally

Stocks, Bonds, Bitcoin, and Commodities Staged a Synchronized Rally

Source: Bloomberg. Note: SPX = S&P 500 Index (US stocks), TLT ETF = iShares 20+ Year Treasury Bond ETF (long-term US Treasury bonds), LQD ETF = iShares iBoxx Investment Grade Corporate Bond ETF (US corporate bonds), BCOM = Bloomberg Commodity Index (Commodities).

FED COMPLETES QUANTITATIVE TIGHTENING

November was the final month of the Federal Reserve’s effort to shrink its balance sheet, as it trimmed an additional -$37 billion during the month. That might not sound like a lot, but it’s part of a much bigger endeavor: since peaking in 2022, the Fed has reduced its holdings by -$2.43 trillion, bringing the total down to $6.54 trillion, which is its lowest level since April 2020. The Fed’s balance sheet is essentially a record of the assets it owns, mostly US Treasury securities and mortgage-backed securities. During the pandemic, the Fed bought trillions of dollars of these assets to stabilize markets and keep borrowing costs low. This process, called Quantitative Easing (QE), pumped money into the financial system. Over the last few years, the Fed was doing the opposite—Quantitative Tightening (QT). By letting bonds mature without replacing them, the Fed slowly pulled money out of the system. It unwound 51% of the $4.8 trillion added during the pandemic era. The goal? To keep inflation under control and maintain financial stability. By shrinking its balance sheet through QT, the Fed inconspicuously tightened financial conditions without raising short-term interest rates further, which could have tipped the economy into recession. The bottom line is that the Fed’s balance sheet may sound like an abstract concept, but it influences the cost of money throughout the economy. With QT now ended, it will be an additional tailwind for the economy as financial conditions ease at the same time the Fed plans to cut rates further into 2026.

The Fed ended Quantitative Tightening (QT) on December 1

The Fed’s Balance Sheet, Total Assets ($ Trillions)

Source: Federal Reserve, Wolf Richter.

DIVIDEND YIELD IS LOWEST SINCE DOTCOM BUBBLE

The S&P 500 dividend yield is about 1.14%, near its lowest level in modern history. As the chart shows below, it’s the lowest since the dot-com bubble, when yields briefly sank to 1.06%. Historically, the S&P 500 dividend yield averaged around 4% from 1871 to 1990. But yields fell sharply in the 1990s and have stayed low since. The dividend yield dropped from 2.8% at the start of 1995 to the all-time low of 1.06% in August 2000. It returned up to near 2.0% by the start of 2005 and averaged 2.1% over the next ten years. But like the 1990s, the dividend yield has been dropping since 2020, averaging just 1.5% since, and falling to 1.14% at the end of November. A combination of factors has led to the dramatic decline, principally strong price appreciation without proportional dividend growth, a material increase in the use of share buybacks instead of dividends, and the significant dominance of the technology sector weighting in the index – now about 35% of the index (many technology firms pay minimal or no dividends). In fact, the percentage of companies paying dividends (56%) hasn’t changed much over decades, but the largest firms’ low payouts have skewed the overall yield much lower. And with the enthusiasm around Artificial Intelligence (AI) pushing valuations higher and further compressing yields the S&P dividend yield isn’t likely to rise anytime soon. In point of fact, top AI companies in the index have minimal yields, with Nvidia at just 0.02%, Microsoft at 0.76%, and Alphabet (the parent of Google) at 0.29%.

The S&P 500 Dividend Yield is the Lowest Since the Dotcom Bubble

Central Bank Policy Rate Hikes and Cuts, 2019 – October 2025

Source: Bloomberg, as of 11/30/2025.

SHUTDOWN MAY DAMPEN 4Q GDP BUT LIFT 1Q

The six‑week government shutdown—the longest on record—ended on Wednesday, November 12, when President Trump signed a short-term funding bill to reopen the government. According to analysis by J.P. Morgan, early data suggests it likely pushed 4Q-2025 Gross Domestic Product (GDP) from modest growth into a slight contraction. Federal spending freezes, furloughed workers, and SNAP disruptions weighed on activity, though most of this demand is expected to shift into early 2026 rather than disappear entirely. That rebound, combined with a lower 4Q base, could make 1Q-2026 growth look stronger, even as the CBO still projects about $15 billion in permanently lost output. Markets largely shrugged off the shutdown, but new risks have emerged, including uncertainty around the Fed’s rate policy, stretched valuations, a funding deadline on January 30, and potential volatility from upcoming IEEPA tariff rulings. In this environment, investors may want to diversify further and consider downside protection as policy and economic risks accumulate.

Government Shutdown Will Weigh on 4Q-2025 but Lift 1Q-2026

Real GDP Growth, Quarter-over-Quarter (seasonally adjusted annual rate)

Source: CBO, J.P. Morgan Research, J.P. Morgan Asset Management.

RECORD OCTOBER BUDGET DEFICIT & INTEREST EXPENSE

There are always risks to the economy lurking, even when the weight of the evidence looks favorable for the near future. One risk, which has persisted for years now, is excessive government spending and the resulting interest burden that drags on economic growth. The federal government kicked off the new fiscal year with a troubling milestone: the worst October budget deficit in US history and the highest interest expense ever for the month of October. The US government posted a higher $284 billion deficit for October 2025, which is the first month of the fiscal year 2026, in a report delayed by, and impacted by, the recent government shutdown. The Treasury Department reported record tariff ​revenues, but that was offset by a shift of some November benefit payments into last month’s data. While revenues were surprisingly strong, spending surged even faster—pushing the monthly deficit to $284.4 billion. That figure not only exceeds last October’s $257.5 billion shortfall but also edges past the previous October record set during the height of the pandemic in 2020. On the revenue side, the government collected $404 billion, a 23.7% increase from the same month last year. A notable boost came from tariff collections, which delivered $31 billion in October as the administration’s trade duties continue to generate steady monthly inflows. But the improvement in revenue was overshadowed by a sharp rise in federal outlays. Government spending climbed to $688.7 billion, up nearly 18% from the $584.2 billion spent in October 2024. Interest costs on the national debt remains a significant pressure point. Over the past 12 months, gross interest payments have reached a record $1.24 trillion, putting them on track to rival Social Security as the government’s single largest annual expense. In October alone, interest payments hit $104.4 billion, the highest ever recorded for the month. With only one month of fiscal 2026 in the books, the US is already off to its most challenging budget start on record. And unless spending growth slows—or revenues accelerate even further—the gap between what the government takes in and what it spends may continue widening in the months ahead.

Source: Department of the Treasury’s Bureau of the Fiscal Service.

Asset Class Performance

The Importance of Diversification. Diversification mitigates the risk of relying on any single investment. It offers many long-term benefits, such as lowering portfolio volatility, improving risk-adjusted returns, and helping investments to compound more effectively.

Source: Bloomberg.

Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “60/40 Allocation” is a weighted average of the ETF proxies shown as represented by: 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 14% Large Growth, 14% Large Value, 4% Mid Growth, 4% Mid Value, 1% Small Growth, 1% Small Value, 17% International Stock, 4% Emerging Markets, 2% Real Estate.

* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Chris Bouffard is CIO of The Retirement Planning Group (TRPG), a Registered Investment Adviser. He has oversight of investments for the advisory services offered through TRPG.

Disclaimer: Information provided is for educational purposes only and does not constitute investment, legal or tax advice. All examples are hypothetical and for illustrative purposes only. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed. Please contact TRPG for more complete information based on your personal circumstances and to obtain personal individual investment advice.