November offered a reminder that even in a market defined by powerful structural themes, the path forward is seldom linear. US equities ended the month mixed, with the S&P 500 and Dow posting modest gains, while the Nasdaq registered its first monthly decline since March. A mid-month pullback in areas that had been on an extended run – particularly stocks tied to the Artificial Intelligence (AI) buildout and popular retail-trading favorites – weighed on returns, though a late-month rebound helped steady broader markets heading into the final month of the year.

Other than the headline return numbers, the month was defined by shifting expectations for the path of monetary policy. Federal Reserve officials came into the month divided on the decision of whether to continue to cut rates or maintain the current policy, while the number of key economic data updates that have either been delayed or cancelled due to the government shutdown further complicated the assessment. As incoming data continued to paint a picture of a cooling, though not collapsing, labor market, many policymakers signaled a growing level of comfort with a December rate cut. Market-implied odds of such a move nearly doubled during the month and, by late November, traders viewed a 25-basis-point reduction in December as the most likely outcome. After a year marked by uncertainty about how much the Fed would be willing to tolerate above-target inflation, markets interpreted the more dovish rhetoric as evidence that policymakers are increasingly attentive to the risks facing employment and economic growth. This signaling effect helped stabilize investor sentiment following the mid-month market drawdown.

Within both markets and the economy, the bifurcation that has characterized much of 2025 remained firmly in place in November. The AI investment cycle continued to drive meaningful dispersion within the Technology sector, as companies tied directly to data-center buildouts, semiconductor supply chains, or model-development infrastructure saw their stocks respond sharply to any perceived change in conditions. November’s pullback in this cohort of stocks demonstrated that valuations still matter, even during a structural boom period. By month-end, several chipmakers and other Tech giants helped lead the late-month rebound, reinforcing the narrative that AI remains the economy’s most durable and important engine of capital spending.

Outside of the Technology world, the picture was a bit more stable. Economically speaking, consumer activity came in broadly resilient, driven by higher-income households whose spending power has remained intact, as has been the case most of the year. Elsewhere in equity markets, investors rotated into what was perceived as a safer, undervalued, yet growth-ready sector in Health Care, which was buoyed during the month by strong drug development news, regulatory wins, and merger and acquisition momentum.

Overall, November painted a representative picture of the broader environment we’ve been in: an economy that continues to grow but in an uneven fashion; a market supported by specific structural themes but prone to bouts of valuation-driven volatility; and a Federal Reserve becoming more accommodative but doing so along a less than certain path forward. The late-month recovery in equities suggested investors, for now, were willing to look past the noise in anticipation of policy support. Whether that optimism proves well-calibrated will depend on the road ahead for cooling inflation, labor-market resilience, and the sustainability of the narrow forces doing most of the heavy lifting.

Our Perspective

With the defining features of 2025 remaining firmly in place – a bifurcated economy, an AI-driven investment boom, and an evolving monetary policy outlook – we continue to be in a unique environment. As an experienced manager with a time-tested investment process across asset classes, we feel well prepared to navigate these and any other changing conditions. We continue to believe these uncertain times require active management to consistently strike the right balance between mitigating risk and pursuing attractive opportunities.

Our View

Economic Cycle		Economic growth is slowing down and becoming increasingly reliant on narrower subsets of the economy. The Fed is easing policy at a time when inflation remains elevated and financial conditions are already relatively accommodative. These conditions merit caution.
Stock Market		The US stock market continues to trade near all-time highs and earnings expectations reflect a rosy outlook. With the Fed looking more cautious in its approach to rate cuts, can earnings growth support higher stock prices in the potential absence of multiple expansion?
Bond Market		Risks to the economy and inflation look balanced. While elevated levels of inflation and resilient growth could push yields higher, a sudden slowdown in growth could also see cuts priced back into the market and yields fall from their current levels. Corporate spreads remain near their lows.
Important Issues on the Radar		Trade Policy: Administration has rolled out an aggressive trade policy at a time when the US economy is already slowing. It’s unclear how the US and its trading partners will navigate this ordeal, and we see the current trade stance at the very least as having injected a great deal of uncertainty into the global economy.
		AI: Booming investment in semiconductors and AI infrastructure has been a feature of markets for years now. The hyperscalers are committing more of their cash flow towards these initiatives, many players have begun to raise debt, and investors will eventually demand tangible return on this massive spending.
		Stock market concentration: The US equity market has become more concentrated in the largest companies than even before, and many of them are tied to the same theme (AI). A diversified portfolio can help mitigate this “hidden risk” in investors’ portfolios.

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Source: Wall Street Journal.

All investments contain risk and may lose value. This material contains the opinions of Manning & Napier, which are subject to change based on evolving market and economic conditions. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but not guaranteed.