Market Outlook November 2025
Resilience amid volatility
October marked the longest government shutdown in U.S. history, but markets didn’t seem to mind much. Despite the absence of official economic data, investor sentiment remained resilient, with equities posting gains across major regions. Several of factors, including trade negotiations, geopolitical developments, corporate earnings, and merger activity provided investors with ample reasons for optimism. U.S. equity indices reached new highs, even though it looked unlikely at the start of the month due to persistent concerns over tariffs and rising credit risks among regional banks. Importantly, the rally was not confined to U.S. markets. Major indices across Asia, including Japan, South Korea, and Taiwan, also posted record highs. The Shanghai Composite closed at its highest level in over a decade, while Argentine equities surged by 22%, buoyed by the electoral victory of President Javier Milei. In fact, MSCI’s Emerging Markets Index hit tenth consecutive monthly gain, and is up some 44% from the April lows hit after President Trump’s Liberation Day. However, mid-October saw a sharp reversal in risk appetite following a social media post by former President Trump, in which he proposed a 100% tariff on Chinese imports.
This announcement triggered a swift sell-off in equities, with the S&P 500 experiencing its worst single-day decline since April. Volatility spiked, as reflected by a 30% surge in the VIX. Nevertheless, markets rebounded quickly after Trump softened his stance, aided by diplomatic signals from Chinese President Xi Jinping, who appears to be wagering that the U.S. economy is ill-equipped to endure a prolonged trade conflict. Investor confidence was also lifted by a strong start to earnings season. The limited macroeconomic data available (most notably the inflation numbers) was sufficiently stable enough to support expectations of further monetary easing. Meanwhile speculative activity remains elevated, with increased flows into leveraged equity funds, distressed assets, and gold. Billions continue to be allocated toward AI infrastructure, though the timeline for realizing returns remains uncertain. Looking ahead, markets may remain sensitive to policy developments and legal rulings, but the underlying fundamentals remain supportive. With earnings strength, resilient consumer behavior, and the prospect of further rate cuts, we see no compelling reason to adopt a bearish stance at this time.
BENDURA INVESTMENT POLICY
The terms attractive / unattractive describe the return potential of the various asset classes. An asset class is considered attractive if its expected return is above the local cash rate. It is considered unattractive if the expected return is negative. Very attractive / very unattractive denote the highest conviction views of the BENDURA Investment Committee. The time horizon for these views is 3-6 months.
GLOBAL ECONOMY
USA
The government shutdown in the United States has effectively halted the release of reliable economic data for the coming weeks. Even if federal operations resume immediately, it will take time to process the backlog and restore normal reporting. At present, the only available insights come from private research firms and sentiment indicators, which offer only a partial and sometimes inconsistent view of the economy. As a result, investors, businesses, and policymakers are forced to make decisions without a clear understanding of current conditions – much like navigating through dense fog.
The U.S. economy currently presents a distinctly two-sided picture. On one side, the technology sector with focus on AI continues to drive growth, with companies making substantial investments. Despite ongoing skepticism, all four tech giants – Meta, Microsoft, Amazon, and Alphabet – are planning to significantly increase capital expenditures in 2026. Meta is nearly doubling its spending to $72 billion this year, with further increases expected. Alphabet (Google) is raising its capital expenditures from $85 billion to between $91 and $93 billion, while Amazon and Microsoft have also signaled aggressive expansion plans. Supporters of this strategy argue that underinvesting could mean falling behind in the race toward artificial general intelligence (AGI). Critics, however, question whether continued investment in large language models (LLMs) will actually lead to AGI, citing slow user adoption and limited monetization so far. While the long-term payoff of these expenditures remains uncertain, for now, tech is acting as a key engine of economic momentum.
Households with exposure to equities and real estate are also benefiting from rising asset values, which are boosting their spending power and helping to sustain consumption. On the other side, a significant portion of the population is facing economic strain. Real wage growth is under pressure, job creation has slowed, and many individuals lack financial reserves. This group is being forced to cut back on spending, which dampens overall consumption and highlights the uneven nature of the recovery.
Europe
European businesses are also feeling the impact of uncertainty surrounding U.S. import tariffs and the pending Supreme Court decision on their legality. As a result, many European firms remain cautious, holding back on investment and hiring. This caution is reflected in the region’s subdued economic performance, with growth falling below its already modest potential of around 1%. Fiscal stimulus has so far been limited, while competitive pressure from China continues to intensify.
Looking ahead, expected additional stimulus measures should be introduced over the course of next year. Lower interest rates should provide some support to growth, and a recovering U.S. economy may help boost European exports. Given this outlook, the European Central Bank (ECB) is unlikely to pursue further rate cuts, or at most may implement one more. From 2026 onward, we anticipate a gradual acceleration in European growth, alongside a clear upward trend in long-term U.S. rates. In this environment, German ten-year yields are likely to break above the 2.8–3.0% range.
Asia
In November 2025, Asia’s economic landscape remained mixed, with China continuing to face internal headwinds despite signs of resilience in exports and industrial production. GDP growth for China is still projected at around 4.8% for the year, in line with government targets, but the pace of recovery has moderated. Retail sales and consumer sentiment remain subdued, and the property sector continues to weigh heavily on domestic demand. Real estate investment is significantly down, and deflationary pressures persist, with core inflation hovering near 0.5% and unemployment at 5.2%. Policymakers in Beijing have maintained a cautious approach to stimulus, relying on targeted fiscal tools and infrastructure spending rather than broad-based measures. Elsewhere in Asia, markets showed divergent trends. Japan and South Korea experienced profit-taking after strong rallies earlier in the quarter, while Hong Kong’s Hang Seng Index benefited from renewed optimism following the U.S.–China trade agreement.
EQUITIES
U.S. equities extended their winning streak in October, marking the longest monthly run of gains in four years. The S&P 500 rose by 2.4%, achieving its sixth consecutive monthly increase and recording its 36th all-time high of the year, which marks the strongest performance since August 2021. The Nasdaq Composite also posted a 4.8% gain, bringing its streak to seven straight months of positive returns, the longest since early 2018. Investor optimism was fueled by several factors: continued enthusiasm around artificial intelligence, easing interest rates, and a softening of trade tensions following former President Trump’s decision to scale back tariff threats. While concerns persist about a potential AI-driven market bubble and signs of weakness in the labor market, these were largely overshadowed by robust earnings reports and aggressive spending plans from major tech firms.
A series of bullish announcements reinforced investor enthusiasm, while tech earnings revealed a continued acceleration in capital expenditures directed toward AI infrastructure. The scale of investment is striking: in September alone, major tech firms raised over $75 billion through investment-grade bond issuances to fund AI data centers. Additionally, banks are syndicating another $38 billion in loans tied to Oracle and Vantage facilities. For context, prior to the pandemic, these companies averaged around $37 billion in annual debt issuance. This surge in spending has raised questions about sustainability. The sharp market reaction to Meta’s announcement of significantly higher capex for 2026 suggests that investors may be growing cautious about how much of this expansion can be funded through operating cash flow alone. Nonetheless, the rationale for continued investment remains clear: current infrastructure is still far from meeting projected demand. What is certain is that the influence of the so-called “Magnificent Seven” tech giants has never been greater, and their strategic decisions are increasingly shaping both market sentiment and capital flows.
European equities also delivered a strong performance in October, with all major indices closing in positive territory. The FTSE 100, DAX, CAC 40, and IBEX each recorded fresh record highs, reflecting broad investor confidence across the region. Positive market drivers in Europe included a supportive policy backdrop and easing trade tensions. Investor sentiment was further lifted by low expectations heading into the Q3 earnings season and growing optimism for 2026. The Q3 2025 reporting season in Europe has started on a surprisingly strong note, with over half of companies having reported so far delivering 2% earnings-per-share (EPS) growth and a higher-than-average rate of earnings beats. For now, the European Central Bank continues to favor an accommodative stance over tightening, which supports the relative outperformance of European equities against US peers in the near term.
South Korea’s Kospi has surged over 70% year-to-date, making it the top-performing major index globally. The rally reflects strong investor enthusiasm for AI, corporate governance reforms, and booming exports. Key drivers include Samsung Electronics and SK Hynix, which together make up nearly 30% of the index and have seen sharp gains amid rising demand for high-bandwidth memory chips. Government efforts to improve market transparency and attract foreign investment have also played a role, with overseas investors turning net buyers in recent months.
Japan’s equity markets had a strong October, with the Nikkei 225 surpassing 48,000 points and the TOPIX reaching record highs. The rally was fueled by political developments, notably the leadership victory of Sanae Takaichi, who is expected to become Japan’s first female Prime Minister and pursue expansionary fiscal and monetary policies reminiscent of Abenomics. Investor optimism was further supported by expectations of increased government spending in high-growth sectors like AI, semiconductors, and defense.
The CSI 300 Index and Shanghai Composite in China had rallied earlier in the year, reaching multi-year highs driven by optimism around government stimulus and AI-related sectors. However, renewed U.S.-China trade tensions including tariff threats and rare earth export disputes dampened sentiment mid-month, causing both indices to pull back by over 2%. Despite this, the market remained resilient overall. AI and semiconductor stocks continued to attract investor interest, and earnings reports from key firms like Luxshare and Foxconn showed strong year-over-year growth.
BONDS
European government bond yields declined modestly over the month. The 10-year Eurozone government bond yield fell from approximately 3.18% at the end of September to 3.09% by October 30, reflecting easing inflationary pressures and subdued growth expectations. The German 10-year Bund yield also declined slightly, while UK 10-year Gilt yields dropped by 22 basis points, indicating a broader softening in long-term rates across the region. European corporate bonds performed well in October, supported by looser financial conditions, declining interest rates, and moderating inflation. Investment-grade and high-yield credit segments both saw positive returns, with BBB-rated bonds outperforming due to a low rate of downgrades to junk status. Looking into 2026, it is likely that ten-year interest rates in Germany will eventually break above the 2.8-3.0% range. Looking further ahead, there is foreseeable additional upward pressure on long-term interest rates in Europe due to large budget deficits, rising debt and higher inflation.
Following recent remarks by Federal Reserve Chair Jerome Powell, signaling concern over slowing growth, U.S. 10-year government bond yields have declined. As long as economic momentum remains subdued, yields are expected to stay below 4.3%. However, if growth rebounds and inflation proves persistent, yields could rise toward 5%, which marks a move likely reinforced by the continued expansion of the federal deficit. We anticipate that U.S. economic growth will moderate to a range of 1.5% to 2.5% in the near term, reflecting a gradual slowdown. Inflation is expected to ease only marginally and could even experience a slight rebound. Given these dynamics, we foresee the Federal Reserve implementing one additional rate cut, likely toward the end of 2025 or in early 2026.
COMMODITIES AND CURRENCIES
Gold had a volatile but strong month in October, reaching a record high of $4,381 per ounce on October 21 before pulling back sharply the next day with a 5.5% single-day drop, the steepest in five years. Despite the correction, gold still posted a monthly gain of around 3.7%, closing at approximately $4,005. The rally was fueled by central bank buying, ETF inflows, and heightened geopolitical risks, while the pullback was largely attributed to profit-taking and a stronger U.S. dollar. Overall, October marked gold’s third consecutive monthly gain, with year-to-date performance exceeding 50%, underscoring its role as a safe-haven asset in uncertain times.
Oil prices have continued to trend lower amid growing concerns over a global supply glut and weakening demand. Brent crude recently settled around $63 per barrel, while WTI hovered near $59, marking the third consecutive monthly decline. The drop is driven by rising output from OPEC+, U.S. shale producers, and other non-OPEC countries, alongside subdued consumption in major markets like the U.S.. Although new U.S. sanctions on Russian oil briefly lifted prices in late October, the overall outlook remains bearish, with forecasts suggesting Brent could fall to $60 by year-end and potentially $50 by end-2026.
The divergence in monetary and fiscal dynamics has recently pressured the EUR/USD lower. However, looking ahead, it is expected that U.S. growth will soften while Europe gradually recovers, supported by lower rates and fiscal measures. This shift should lead to a move in EUR/USD toward 1.20–1.22.
The Swiss franc (CHF) has shown modest strength against the euro (EUR), with the exchange rate currently around 0.9314 EUR per CHF. Over the past few months, the pair has traded in a relatively stable range between 0.927 and 0.944 EUR/CHF. This resilience is supported by Switzerland’s zero-interest rate policy, low inflation, and safe-haven appeal amid geopolitical tensions. Meanwhile, the euro has faced headwinds from weak German export data and political uncertainty in the Eurozone, which have weighed on its performance. Looking ahead, forecasts suggest the EUR/CHF rate fluctuate around 0.93 in the coming weeks and months, with increases not going much further than 0.955. In the medium term, we see the exchange rate gradually falling towards 0.90 or lower. However, this outlook remains sensitive to central bank actions, inflation trends, and broader geopolitical developments.
