– René Descartes
“Doubt is the origin of wisdom.”
This month we discuss an eventful November for markets, tentative hopes for peace in Ukraine, and Labour’s not-so-pro-growth budget.
Markets turned noticeably choppier in November as investors reassessed the path of US interest rates and questioned the return potential on the vast sums being committed to artificial intelligence infrastructure by big-tech players. Overhang from the October Federal Reserve meeting – where Chair Powell struck a noticeably cautious tone, and markets dialled back expectations of a December cut – set a subdued backdrop, while intensifying debate around AI valuations and growing talk of bubble dynamics added to market jitters. SoftBank’s decision to sell its entire holding in Nvidia contributed further volatility, as investors latched onto any sign that the tech rally may be nearing its peak.
The S&P 500 shed roughly -4.4% in the first 20 days of the month, with Nvidia down -10.8% over this period and fellow AI stalwarts Microsoft and Meta down -7.6% and -9.1% respectively. Broader risk sentiment was challenged too, with the VIX reaching 26.4pts – levels not seen since April.
As the month progressed, sentiment improved. The end of the 43-day U.S. government shutdown removed a major source of uncertainty and allowed several key data releases to come through. These pointed to stable inflation and a gradual softening in the labour market, helping shift expectations back toward further rate easing. Fed speakers adopted a more supportive tone, and the probability of a December cut – which had dropped below 25% at its low on 20 November – ticked back up (and now sits at c.90%). Equity markets rebounded sharply, 10-year Treasury yields drifted toward the 4% level, and the S&P 500 ended the month marginally higher (+0.1%) – a result few would have predicted amid the mid-month malaise.
Under the bonnet, though, caution around big-tech multiples remains. The Magnificent Seven failed to regain their early-month strength – despite better-than-expected earnings from Nvidia – ending the month down -1.1% as investors weighed stretched valuations against macro and interest-rate uncertainty. Last month’s wobble serves as a timely reminder that lofty valuations anchored on uninterrupted growth and benign rate moves can prove fragile. A slight miss on earnings, or a shift in rate expectations, can carry disproportionate downside. Against this backdrop, a balanced, diversified stance continues to feel prudent.
“Intensifying debate around AI valuations and growing talk of bubble dynamics added to market jitters”
The war in Ukraine returned to the forefront following the circulation of a US-backed 28-point framework outlining a potential path to end the conflict. The draft envisaged substantial concessions from Ukraine, including limits on military capacity, a prohibition on future NATO membership and potential territorial adjustments. The proposals prompted strong resistance in Kyiv and among European allies, who argued any settlement must protect Ukraine’s sovereignty and security rather than reward aggression. In response, Ukraine and several European governments pushed for revisions, while Russia kept its position deliberately opaque. The Russian side has acknowledged that the plan could form a basis for discussion, rather than a take-it-or-leave-it proposal, but reiterated that withdrawal of Ukrainian forces from occupied territories remains a prerequisite – signalling little willingness to meaningfully soften longstanding demands. The result is a fragile balance: diplomatic activity has accelerated, but the wide distance on questions of territorial integrity and security guarantees means a credible resolution still appears highly uncertain.
Tentative optimism that the conflict might be edging toward a negotiated pause – Polymarket odds of a ceasefire by March 2026 rose from 22% at the start of November to 27% by month’s end – provided a boost to European assets and saw oil continue its downward trajectory (posting its fourth consecutive down-month).
“Diplomatic activity has accelerated, but a credible resolution still appears highly uncertain.”
The UK’s Autumn Budget has exposed fault-lines in a government that only last year campaigned on a pro-growth agenda. Rachel Reeves announced around £26 billion of fresh tax increases – via frozen income-tax thresholds and higher levies on investments, pensions and high-value property – to fund expanded welfare commitments and rebuild a fiscal buffer. The package drew sharp criticism, with opponents accusing the government of drifting toward “high-tax, high-spend” territory just as productivity and growth forecasts are being downgraded. The measures point to a rising fiscal burden, weaker incentives to save or invest and greater uncertainty around households’ disposable income, while also raising questions about the UK’s competitiveness as a destination for capital and talent. Although 10-year gilts strengthened modestly as markets absorbed the detail, the budget risks creating a growth headwind and casts doubt over the credibility of a government elected on a pro-growth mandate and a promise not to raise taxes on working people. Calls from some quarters for the heads of Reeves and the Prime Minister have already surfaced, and Reform UK is positioning itself aggressively – but any immediate change at the top appears unlikely given Starmer’s public backing of his Chancellor, and the lack of any obvious successor for the PM. Even so, it may prove a long three years for businesses and investors as policy uncertainty and political pressure continue to build.
“Fresh tax hikes raise questions about the UK’s competitiveness for capital and talent.”
The volatility seen last month highlights how quickly sentiment can shift, and how vulnerable concentrated portfolios can become when a single theme drives returns. With uncertainty elevated across interest rate trajectories, geopolitics, and domestic policy, diversification across a broad mix of return drivers remains prudent. Strategies designed to perform through periods of volatility – including discretionary macro, relative-value, and multi-strategy hedge funds – remain attractive.
“Diversification across a broad mix of return drivers remains prudent.”
If you have any questions about the themes discussed in this article, please do not hesitate to get in contact with us: info@bedrockgroup.ch
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