24 days ‘till Christmas (but who’s counting…)
Markets were mixed in November. The S&P 500 finished the month essentially flat at +0.1%, while small-cap stocks (Russell 2000) gained about +0.6%, showing a bit more strength. Gold had a strong month, rising roughly +5.5%. Company-level results remained solid, but broader market sentiment stayed cautious. Nvidia is a good example: despite excellent earnings, strong demand, and clear guidance, the stock still pulled back — a sign that investors are debating the long-term payoff of today’s massive AI investment cycle, not the company’s fundamentals. This kind of reset is healthy and echoes past periods where early-stage over-building eventually sorted itself out.
The job market continues to look stable. Weekly jobless claims near 220,000 are right in the range that signals “steady, not stressed.” At the same time, continuing claims have moved higher, meaning workers who do lose jobs are having a harder time getting rehired. Companies are holding on to employees but not aggressively expanding their workforce. Historically, this setup can precede a productivity boost if demand holds up.
This is why holiday spending data over the next two weeks matters. Real-time credit-card activity and retailer updates will tell us far more about consumer strength than the latest payroll reports, which were distorted by the recent government shutdown. Strong spending would point the Federal Reserve toward pausing at the December meeting. Softer spending would make that meeting more uncertain.
Speaking of which, this upcoming Fed meeting is one of the most unpredictable in years. Normally, Chair Powell likes to signal decisions well ahead of time — but the economic data simply isn’t giving the Fed a clear answer. Unless jobless claims rise meaningfully or holiday spending weakens sharply, the most likely outcome is a December pause with stronger hints that rate cuts could start early in 2026. Some Fed officials have already opened the door to cuts, while others remain cautious because unemployment hasn’t moved much. Investors should expect volatility around both the statement and the new rate projections.
In credit markets, private credit is seeing its first real slowdown after huge inflows. Credit spreads have widened slightly for major companies — not a sign of crisis, but a sign that lenders are starting to price risk more realistically. Business loan demand at banks remains muted, deposit growth has slowed, and the overall money supply has drifted lower. None of this points to inflationary pressure, which gives the Fed more flexibility to cut rates when needed.
Long-term interest rates holding above 4.1% align with a broader shift: even when the Fed eventually cuts, we’re unlikely to return to the sub-3% long-bond environment of the 2010s. Mortgage rates are likely to stay near 6%. Even proposals like 50-year mortgages only reduce monthly payments modestly and leave most of the principal outstanding for decades. Real housing affordability improvement requires more supply — not financial engineering.
The biggest long-term driver for markets remains AI adoption. Consumers have embraced AI quickly, but the trillion-dollar question is whether businesses will adopt these tools at scale and see enough productivity gains to justify the enormous investment cycle we’re seeing. Automation, robotics, and full-self-driving could eventually free up millions of workers, but the timing matters. Until we have clarity on adoption and payoff, markets will continue to swing between optimism and caution. That kind of volatility is normal — and healthy — during a major technological shift.
So what does all this mean for you and me and our portfolios?
Our portfolios are built for exactly the kind of environment we’re seeing right now — a mix of strong company fundamentals, cautious market sentiment, and crosscurrents around interest rates and economic data. November reinforced why diversification matters: the S&P 500 finished the month essentially flat, while small-cap stocks posted modest gains and gold rose more than 5%. Because we don’t rely on a single index or sector to drive returns, different parts of the portfolio can contribute at different times. Our mix of core U.S. equities, quality growth companies, value stocks, mid- and small-caps, and international holdings is designed so that no single theme determines overall outcomes.
You saw this clearly in the market reaction to Nvidia. The company posted excellent earnings, yet the stock sold off anyway, showing that even strong businesses can swing when expectations are high. This is a big reason we don’t build portfolios around individual stocks. Instead, we use broad exposure to U.S. and global equities through specific ETFs (FYI: you need to become a client to get that list and the overall allocations). 🙂
This captures long-term secular trends like AI, automation, and global supply-chain shifts without tying client outcomes to any one company.
The broader economic backdrop also supports the way we’re positioned. The labor market remains stable but is no longer accelerating, which historically favors high-quality companies with strong balance sheets and consistent cash flows — exactly the focus of our equity sleeve. At the same time, uncertainty around the Federal Reserve’s December meeting — and the timing of eventual rate cuts — makes a balanced approach essential. Our fixed-income sleeve benefits from today’s higher yields, adds stability during volatility, and is positioned to participate when rate cuts eventually arrive.
Finally, global diversification matters more than ever as long-term interest rates remain elevated and economic leadership rotates across regions. International and emerging-market exposure gives us growth opportunities that don’t depend solely on the U.S. economy. Gold’s strong performance in November is another reminder that thoughtful diversifiers can add real value during uncertain periods. Taken together, the portfolio is designed to participate in long-term growth while managing risk in a world where markets can shift quickly — which is exactly what we saw this month.
Market Volatility
This is the part of the newsletter where I remind you that markets don’t move in straight lines.
