Along with tech worries, we also observed a reversal of the trend observed since the market recovery in May, as defensive sectors significantly outperformed cyclical sectors and technology.
After a strong run in the first 10 months of the year, stock markets took a breather in November. Although the longest US government shutdown, lasting 43 days, ended in the middle of the month, market uncertainty regarding the ambiguous data environment, the impact on growth, and the progress of monetary policy weighed on sentiment. Stocks in developed markets rose by just 0.3%, despite a robust earnings season and rising hopes for a Federal Reserve interest rate cut in December.
Excellent quarterly results from NVIDIA failed to allay concerns about high valuations and fears of overly optimistic profit expectations surrounding the artificial intelligence (AI) ecosystem. Technology was the worst-performing sector in the month, exerting significant pressure on growth stocks, which were down 1.3% and notably underperformed the value segment of the market by 3.5% points. Technology-heavy markets such as Korea and Taiwan, which had risen sharply over the course of the year, suffered steeper losses in November, contributing to the 2.7% point underperformance of emerging markets vs. developed markets.
A muted outlook for the oil market, which is expected to move into surplus in coming years, hurt Middle Eastern markets, adding to the region’s headwinds. Commodities were up in November as rising prices in precious metals compensated for weakness in energy and industrial metals.
Global bond markets were also flat over the month, returning 0.2%, as weaker US labour market and consumer confidence data provided some support, while the perception of higher future supply detracted from performance.
Equities
The third-quarter earnings season concluded in November and confirmed the strong earnings trend from the previous quarter. In the US, 81% of companies in the S&P 500 beat consensus earnings. Year-over-year earnings growth reached 13%, driven by over 7% revenue growth and 6% margin expansion. Technology-related earnings were particularly impressive. The 2025 consensus earnings-per-share (EPS) growth expectation for the Magnificent Seven increased to over 22%, which is now significantly higher than the 15% estimate from seven months ago. The same dynamics were observed for 2026 estimates, where Magnificent Seven EPS growth expectations increased to 22.5% compared to 11% for the rest of the market.
However, strong earnings and revenue beats failed to ignite another leg up in the group or the broader US market, which rose by just 0.2% in November. This performance indicates that investors’ expectations are already high and there are growing doubts about whether ambitious growth targets can be fulfilled. In our Investment Outlook 2026, we dedicate a whole chapter to this issue: “Navigate tech concentration carefully.” Along with tech worries, we also observed a reversal of the trend observed since the market recovery in May, as defensive sectors significantly outperformed cyclical sectors and technology.
In Europe ex UK, financials and IT continued their strong earnings trend, while consumer sector earnings—particularly in the autos sector—disappointed. A robust 12% EPS growth outlook for 2026 and less technology concentration in the market helped European equities (+1.1%) to slightly outperform US markets in November. The UK equity market (+0.4%) was held back by profit-taking in industrial names and weak sentiment in the consumer sector.
A weaker yen supported the export-oriented Japanese market (+1.4%). Asian markets ex Japan were at the bottom of the table as investors took profits after a very strong year. Korean equities fell 3% in US dollar terms and Taiwan shed 4%, while Indian equities were down 0.2%, outperforming the broader region.
Fixed income
Fixed income markets grappled with the uncertainty created by the lack of data from the US and questions about the future policy path of the Federal Reserve (Fed). The pass-through of tariffs to the US consumer continues to be a known unknown for economists, and fiscal expansion poses an additional risk for price stability in 2026. By the end of November, the needle turned more in favour of a Fed rate cut at the Fed’s next meeting on 10 December.
The US labour market data painted a mixed picture as unemployment continued to creep up in September to 4.4% and continuing jobless claims rose to the highest level in three years. On the other hand, non-farm payrolls surprised to the upside in September. However, a surprisingly weak consumer confidence report from the Conference Board in November is questioning the perception of strong US growth based on robust private sector demand. US Treasury yields fell, lifting US bonds to the top of the fixed income table with a monthly gain of +0.6%.
Japanese government bonds, on the other hand, were one of the worst-performing segments in fixed income, returning -1.3% in local currency terms. Government bond yields continued to rise as doubts grew about how long expansionary fiscal policy, supported by loose monetary policy from the Bank of Japan, could be maintained. The depreciating yen adds to the inflationary risks in the Japanese economy, with the October consumer price index (CPI) rising 3% year over year.
In the UK, CPI inflation moderated to 3.6% year-over-year, but this was not enough to support Gilts as uncertainty about the Budget dominated. After weeks of intense speculation, the Budget announcement was largely uneventful, and the announcement of lower Gilt supply ahead provided some relief to sterling fixed income investors. UK government bond returns were relatively flat in November, returning 0.1%.
In the eurozone, German Bunds underperformed as the planned net new borrowing by the federal government overshot initial projections. Inflation-linkers rose by just 0.2% in November as inflation and duration headwinds outside the US detracted from performance.
Conclusion
Market returns in November took a breather from the very strong returns in previous months. However, beneath a calm surface, we observed remarkable rotation within asset classes. Despite strong fundamentals, the growth part of the market failed to outperform, while previously unloved defensive sectors, such as healthcare and consumer staples, fared much better. This rotation is a reminder to investors that despite strong policy support current high valuations often go hand-in-hand with high and sometimes exuberant future growth expectations. As we point out in our Investment Outlook 2026, we believe that diversifying equity portfolios regionally can both enhance returns and protect against concentration risks, particularly if AI sentiment turns less positive. High-quality bonds also still have an important role to play in risk management if AI turns out to be a bubble.