Market Comment - November

During the month of November, we found ourselves in the midst of uncertainty, and for an outside observer, the stock market’s behavior could have been diagnosed as a bipolar disorder.

The allure to build long positions in order to participate in the infamous year-end rally was constrained by an increasing number of market participants raising their voices that the FED will not cut rates during the December meeting. Moreover, the recent deal-making by OpenAI raised some eyebrows and questions about over-capacity, irresponsible spending, and a bubble frenzy. Currently, we are also witnessing debt stepping in the AI infrastructure trade, which led to the conclusion that the risk capital has been tapped out and that equity investors will have to factor in credit markets to take the temperature of the AI infrastructure trade. As of today, total AI-related borrowing rose to USD 126 billion in 2025; that’s a 500% jump from 2024. Compared to the USD 21.2 trillion market capitalization of the Magnificent Seven companies, the total amount of debt remains small, but the rate of increase was impressive. Also, irresponsible spending does not go well with debt building. In the end, we are talking about infrastructure spending, and to monetize it, it will take some time. After three weeks of trading, market participants pushed the technology-heavy Nasdaq down 7.50%, the S&P 500 lost 4.00%, while the Stoxx 600 showed more resilience, losing only 2.60%. During the last week of the month, the interest rate narrative completely changed. Within a couple of days, the odds for a FED rate cut rose above 80.00%, and equity markets staged a sharp recovery to end the month only slightly, but still, in positive territory. That makes the count for the MSCI up eight months in a row, for the S&P 500 up seven months in a row. The best-performing sector was healthcare (XLV +9.30%), the worst-performing sector was technology (XLK -4.78%). The best industry group was Gold Miners (GDX +15.56%), the worst industry group was software (IGV -9.90%). Apollo Global and Blackstone believe that AI could disrupt many software business models. The relative strength of the gold miners could be an indication that we will see another reflation trade in 2026. While we finish this monthly report, we have only twelve trading days left on the NYSE; good liquidity in markets remains until the 19th of December. This year, the proverbial Santa Claus Rally will start on the 24th of December (last five trading days of the old year) and will end on January the 5th (first two trading days of the new year). Some say the Santa Rally performance will be crucial, as it is a tell of how the full year will go. The backtest of the statistic does not fully confirm this view. The past two Santa Rallies have been negative (2024 and 2025), while the full year turned out to go well. The worst Santa Rallies since 1951 have been in the years 2000 (-4.00%) and 2008 (-2.50%). Ok, that worked well. Another well-known statistic is the US presidential cycle. 2026 will be a mid-term year, and those years are usually complicated. The average return is the lowest, while the average maximum drawdown is the highest within the presidential cycle. Nervousness and uncertainties leading to strong fluctuations in 2026 could well be a part of the game plan once again. Looking at the big picture, commodities have a great setup to become the best performer in 2026. The canary in the coal mine remains crude oil, which has trouble getting into a bullish gear, with Goldman Sachs and Trafigura publishing very bearish reports. The sentiment in the oil market is getting depressed, to say the least. Finally, Warren Buffett released his last Berkshire Hathaway report. One of the richest men on this planet worked until the age of 95. His letters, full of wisdom and intelligence, will be dearly missed.