In November, equity markets once again reflected the defining pattern of 2025: frequent bouts of volatility, but no real break in the underlying uptrend. The S&P 500 fell as much as 6% from its October highs before staging a sharp rebound during the shortened Thanksgiving week, ultimately closing the month with a modest gain of around 0.4%. This was already the seventh correction of at least 3% this year, underlining that such pullbacks are now a built-in feature of this market regime rather than a signal of an imminent change in cycle.
This back-and-forth has left a clear mark on investor psychology, especially among retail investors. Sentiment surveys remain in negative territory, consistent with a perception of a “fragile” market overly dependent on a handful of large growth names. Yet this persistent caution stands in contrast to broadly resilient macro data and solid corporate earnings, which argues for interpreting the recent weakness mainly through a behavioural lens rather than as the result of a fundamental shock.
Technically, major U.S. indices have moved back into oversold territory on short-term indicators, with RSI readings similar to those seen around the April lows levels that, in hindsight, offered attractive entry points. Weekly momentum, however, is still hesitant, which makes a choppy, stop‑and‑go market more likely in the weeks ahead than an immediate and linear move back to new highs. In practice, the set‑up points to a grinding advance punctuated by pullbacks, rather than a clean breakout.
Sector rotation tells the same story. Technology bore the brunt of the consolidation, with significant drawdowns even among leading AI names that delivered solid earnings. In parallel, other areas – industrials, quality cyclicals and selected value segments – started to play a bigger role in the late‑month rebound. This rebalancing, while still early, is encouraging: it helps broaden a market that had been driven by a relatively narrow leadership for most of the year.
On the macro and policy front, attention now turns to the Federal Reserve’s December meeting. Markets are pricing a high likelihood of another 25 bp cut against a backdrop of moderating inflation and a labour market showing early signs of cooling. Beyond the individual decision, the key point for risk assets is that the hiking cycle is behind us and policy is gradually shifting towards a more supportive stance.
Seasonality adds a further tailwind. Historically, the November–December window is one of the strongest periods for equities, and years characterised by a strong sequence of gains into October often see additional, if more modest, upside into year‑end. Combined with elevated cash levels and still‑sceptical sentiment, this creates fertile ground for a year‑end rally, provided the data flow remains “good enough”. In this environment, the base case remains for a market that is volatile but biased higher into the turn of the year, with scope for the S&P 500 to move towards the 7,000–7,300 area as 2025 gives way to 2026, and interim setbacks offering opportunities to selectively add to high‑quality equity exposure.
