Muted Stock Returns but Solid Bond Gains in November as Government Shutdown Finally Ends
HIGHLIGHTS:
- Stocks: A late-month rally drove the S&P 500 and Dow Jones Industrial Average to modest gains in November, while the Nasdaq Composite and, more broadly, growth stocks declined.
- Bonds: Rates generally drifted lower in November ending at 4.02%, a good backdrop for bond results.
- U.S. Economy: Government data was still largely absent in November, but some reports were released later in the month.
- Federal Reserve: The FOMC held no meetings in November. Markets strongly favored another rate cut at the December FOMC meeting based on the CME FedWatch tool as of December 1, 2025. This cut would be the third this year.
Equity Markets
After experiencing a modest 5% correction, equities generally recovered in the latter part of November, but final results were ultimately mixed. See Table 1 for November 2025 and YTD returns.
Table 1 | Equity Markets
| Index | November | YTD |
|---|---|---|
| S&P 500 | 0.25% | 17.81% |
| S&P 500 Equal Weight | 1.90% | 10.93% |
| DJIA | 0.48% | 13.88% |
| Russell 3000 | 0.27% | 17.17% |
| NASDAQ Comp. | -1.45% | 21.71% |
| Russell 2000 | 0.96% | 13.47% |
| MSCI ACWI ex U.S. | -0.03% | 28.53% |
| MSCI Emerging Mkts Net | -2.39% | 29.69% |
Although volatile, the major stock indices ended November without significant changes. The Nasdaq Composite Index, the weakest U.S. index in November, fell less than -1.5%, and the largest gainer, the equal-weighted S&P 500 Index, rose less than 2%. The S&P 500, Dow Jones Industrial Average, Russell 3000, and Russell 2000 indices all gained less than 1% for the month. While subtle, large-cap growth paused in November and had some of the weakest results, while both large- and small-cap value stocks turned in positive gains. Better results for the equal-weighted S&P 500 Index compared to the S&P 500, reflected the rally broadening beyond just the largest cap tech names. Year to date, large-cap growth has still clearly led in U.S. stocks, but small caps and value stocks closed the gap modestly last month. Stocks have recovered strongly from their April lows with double-digit year-to-date gains across the board on Table 1.
The MSCI ACWI ex U.S. Index, the broad measure of international stocks, was more-or-less flat in November, while emerging markets were the weakest of any of the equity indices on Table 1 declining -2.39%. Despite that decline, emerging markets still have the strongest year-to-date results, and both measures of international stocks are well ahead of their U.S. counterparts in 2025 after underperforming for much of the last 15 years. Following the April lows, stocks have had an impressive rally with little weakness along the way. It is imperative to remember that stocks can be volatile, and pullbacks like the ones we experienced in November are not unusual.
Fixed Income
Bonds continued their solid year with another month of good returns in November. After an initial move higher, rates generally declined during the month, which led to a positive backdrop for most bonds. See Table 2 for bond index returns for November 2025 and YTD.
Table 2 | Fixed Income Markets
| Index | November | YTD |
|---|---|---|
| Bloomberg U.S. Agg | 0.62% | 7.46% |
| Bloomberg U.S. Credit | 0.62% | 8.04% |
| Bloomberg U.S. High Yld | 0.58% | 8.01% |
| Bloomberg Muni | 0.23% | 4.15% |
| Bloomberg 30-year U.S. TSY | 0.27% | 5.99% |
| Bloomberg U.S. TSY | 0.62% | 6.67% |
The 10-year U.S. Treasury yield closed at 4.17% on November 5, marking its high close for the month. From that point, yields slipped lower and created a positive backdrop for most bond sectors, which continued the trend in recent months of rates moving lower. The recent outperformance of munis faded somewhat in November, but results were still positive. The results of the Agg, Credit, High Yield and Treasury indices were all within four basis points of each other, reflecting broad gains in bonds last month. In general, bonds have done their job in 2025, posting solid gains and helping to offset some of the equity market volatility.
We maintain our long-standing position favoring credit versus pure rate exposure in this interest rate environment. Credit spreads have remained near historic lows as corporate bonds have outperformed Treasuries so far this year. We also believe the role bonds play in a portfolio, to provide stable cash flow and to help offset the volatility of stocks in the long run, has not changed. As the Fed resumes its rate-cutting cycle, we believe having an active bond management approach makes sense. Furthermore, rates remain elevated and provide attractive opportunities for bond investors.
Economic Data Highlights and Outlook
Our comments will be limited in this section as the government shutdown resulted in most economic data not being compiled or released. With that said, we will highlight a few releases of note.
The September Producer Price Index (PPI) was released in late November. The headline PPI increased 0.3% as expected for the month and the core reading (excluding food and energy prices) increased only 0.1% compared to estimates at 0.2%. On a year-over-year basis, the readings increased 2.7% and 2.6%, respectively. The headline reading was 0.1% higher than expected, and the core reading was 0.1% lower than expected.
Recall that CPI was released in October for September since this reading was needed by law to make cost of living adjustments. The core and headline year-over-year increases through September came in at 3.0%. It appears the Bureau of Labor Statistics (BLS) will not release October inflation data and will instead resume CPI releases covering November on December 18 (per the BLS website).
Payroll data for September showed 119,000 job additions, easily surpassing the estimate of 53,000, but August payrolls were revised to show a decline of -4,000 jobs compared to an initial release of 22,000 additions. The unemployment rate did increase to 4.4% in September, which was higher than expectations and the prior reading of 4.3%. This was the highest unemployment rate since coming out of the pandemic in 2021. (The October and November job market readings are both expected to be released on December 16). Please see Chart 1 below showing the gradually rising unemployment rate.
Chart 1
The Institute for Supply Management (ISM) Manufacturing Index continued to reflect contraction, with a reading of 48.2 in November on the heels of a disappointing 48.7 reading in October. The ISM Non-Manufacturing Index, which covers the much larger service industries in the U.S. economy, was a spot of good news coming in at 52.4 in October, which was higher than expectations of 50.8 and improved from September’s level of 50.0. New orders were significantly stronger than expected in October (56.2 vs. 51.0). Recall for the ISM indices, readings above 50 represent expansion and below 50 reflect contraction.
The preliminary University of Michigan Consumer Sentiment survey for November dropped to 50.3 compared to expectations of 53.0 and the final October level of 53.6. After recovering in early summer from very pessimistic levels following the tariff announcements in April and May, consumer sentiment has slid lower from late summer and into fall.
Finally, the Atlanta Fed GDP Now estimate shows expected Q3 2025 growth to come in at a 3.9% annualized pace (as of December 1, 2025), which would surpass the strong final growth rate of 3.8% in the second quarter. However, with the government shutdown, the preliminary reading of Q3 GDP was not reported at the end of October as it was originally scheduled and is now expected to be released December 23, per the Bureau of Economic Analysis (BEA) website.
The Federal Reserve did not meet in November. After two straight meetings with rate cuts in September and October, the odds of a rate cut at the December 9-10 meeting moved around sharply during the month. Chair Powell’s press conference comments after the October FOMC meeting were somewhat hawkish and caused the market to reassess the speed of this rate cut cycle. However, moving into December, the odds once again strongly favored a rate cut at the final FOMC meeting of 2025 with an 87.4% probability per the CME FedWatch tool on December 1, 2025. This final FOMC meeting of 2025 will also be accompanied with new economic projections by Fed officials—the so-called dot plots—so it will provide market participants with plenty of information to digest going into the end of the year.
Markets have proven to be strong for most of the year. From tariff uncertainty to a record-long government shutdown, equity markets have been able to climb the “wall of worry” and ascend to new all-time highs. It will take some time for government economic releases to get back on schedule, but December begins that process. Stock valuations have crept higher and sit at elevated levels. However, valuations have not grown too alarming in our opinion and are supported by record high earnings and accelerating growth. In our opinion, we still see opportunities in the stock market as we close out 2025, and bond yields still provide opportunities in fixed income despite moving lower recently. As always, we believe it is imperative for investors to stay focused on their long-term goals and not let short-term swings in the market derail them from their longer-term objectives.
Please Note: Items highlighted in blue in the table below have not been updated since the prior month due to the government shutdown and updates to those prior readings not being available.
Economic Data
| Event | Period | Estimate | Actual | Prior | Revised |
|---|---|---|---|---|---|
| ISM Manufacturing | Oct | 49.5 | 48.7 | 49.1 | — |
| ISM Services Index | Oct | 50.8 | 52.4 | 50 | — |
| Change in Nonfarm Payrolls | Sept | 53k | 119k | 22k | -4k |
| Unemployment Rate | Sept | 4.30% | 4.40% | 4.30% | — |
| Average Hourly Earnings YoY | Sept | 3.70% | 3.80% | 3.70% | 3.80% |
| JOLTS Job Openings | Aug | 7200k | 7227k | 7181k | 7208k |
| PPI Final Demand MoM | Sept | 0.30% | 0.30% | -0.10% | — |
| PPI Final Demand YoY | Sept | 2.60% | 2.70% | 2.60% | 2.70% |
| PPI Ex Food and Energy MoM | Sept | 0.20% | 0.10% | -0.10% | — |
| PPI Ex Food and Energy YoY | Sept | 2.70% | 2.60% | 2.80% | 2.90% |
| CPI MoM | Sept | 0.40% | 0.30% | 0.40% | — |
| CPI YoY | Sept | 3.10% | 3.00% | 2.90% | — |
| CPI Ex Food and Energy MoM | Sept | 0.30% | 0.20% | 0.30% | — |
| CPI Ex Food and Energy YoY | Sept | 3.10% | 3.00% | 3.10% | — |
| Retail Sales Ex Auto and Gas | Sept | 0.30% | 0.10% | 0.70% | 0.60% |
| Industrial Production MoM | Aug | -0.10% | 0.10% | -0.10% | -0.40% |
| Building Permits | Aug P | 1370k | 1312k | 1362k | __ |
| Housing Starts | Aug | 1365k | 1307k | 1428k | 1429k |
| New Home Sales | Aug | 650k | 800k | 652k | 664k |
| Existing Home Sales | Oct | 4.08m | 4.10m | 4.06m | 4.05m |
| Leading Index | Aug | -0.20% | -0.50% | -0.10% | 0.10% |
| Durable Goods Orders | Sept P | 0.50% | 0.50% | 2.90% | 3.00% |
| GDP Annualized QoQ | 2Q T | 3.30% | 3.80% | 3.30% | — |
| U. of Mich. Sentiment | Nov P | 53 | 50.3 | 53.6 | — |
| Personal Income | Aug | 0.30% | 0.40% | 0.40% | __ |
| Personal Spending | Aug | 0.50% | 0.60% | 0.50% | __ |
| S&P Cotality CS 20-City YoY NSA | Sept | 1.40% | 1.36% | 1.58% | 1.57% |
Source: Bloomberg; P=Preliminary, T=Third Reading.
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