Portfolio Perspectives, November 2025

Stay ahead of the curve with our experts’ breakdown of this month’s market shifts and the insights shaping our portfolio positioning.

Fast reading:

• Equity markets consolidated in November with the world index down 0.7% in Euro terms. Tech led the decline, falling over 5%, with spillover to Industrials and Consumer Discretionary both down over 2%, Healthcare was a bright spot, up just over 7%. US jobs data surprised positively, signalling resilience. No portfolio changes this month; we remain slightly cautious.

• November was a month of two halves, with shifting expectations around Federal Reserve policy proved to be the dominant market driver for the month. Anticipation of a December rate cut took investors on somewhat of a round trip, as investors priced out and then in the probability of move.

•  The US dollar has been a drag on euro-based portfolios, down 12% year-to-date. While much of its overvaluation has been corrected, narrowing rate differentials still pose some risk. Historically, the euro rarely trades beyond 1.20 when the rate gap favours the dollar. Given resilient US growth, we expect the dollar to remain within its long-term range.

November’s Chill: Tech Cools After Hot Run

November has been a challenging month for equity markets, with the world index down about 0.7%. Investors are questioning whether tech companies are overvalued and if earnings can keep growing at the same pace. On the positive side interest rate cuts in the US are back on the agenda with the next meeting expected to deliver a cut of 0.25%.

Tech has been the weakest sector, falling over 5%, and that’s dragged down other areas like Industrials (down 2.3%) and Consumer Discretionary (down 2.7%) but there’s good news too – Healthcare stocks are up over 7%, thanks to agreements between the US government and major pharmaceutical companies on pricing and production.

On the economic front, recent US jobs data surprised positively, showing more job creation than expected – a sign the labour market might be turning a corner. Europe’s economy is still growing slowly, around 0.75% to 1%, while China continues to face pressure on consumer spending.

Looking ahead, interest rates across developed markets are likely to stay flat to down over the next year, which would be good news for stocks. Corporate earnings have been strong, especially in the US, where profits grew 15% year-on-year, much better than expected. Sectors like Materials, Industrials, Consumer Discretionary, and Financials all posted double-digit growth. Europe is improving too, though some industries like motors and mining remain weak.

We have not made changes to our portfolios this month. We remain slightly cautious for now, watching how US tariffs affect prices and whether the labour market continues to strengthen. But overall, the recent market pullback looks healthy. Fundamentals are improving – earnings are strong and the economy may be more resilient than feared. That means corrections could offer opportunities to add risk in the future.

Bernard Swords, Chief Investment Officer

November a month of two halves

November was a month of two halves, with shifting expectations around Federal Reserve policy proved to be the dominant market driver for the month. Anticipation of a December rate cut took investors on somewhat of a round trip, as investors priced out and then in the probability of move.

The month began with markets assigning nearly a 70% probability to a December Fed cut. This optimism buoyed risk sentiment, which had been unsettled by October’s uncertainty. However, these expectations were soon dialled back following hawkish economic data, particularly pricing components within key macro indicators. Additional pressure came from limited labour market data and the release of the October Fed minutes, which drove expectations for a December cut to a low of less than 25%.

This point marked a turn in sentiment as comments from New York Fed President Williams, noting room for another cut “in the near term,” triggered a rebound in expectations. His remarks were reinforced by other Fed officials, further boosting markets. Momentum accelerated after a Bloomberg report suggested Kevin Hassett, considered a dovish choice and previously touted by Trump, was the frontrunner to become the next Fed Chair.

In Europe, the UK budget brought fiscal stability back into focus for investors. Bond markets initially reacted positively, as the release revealed the government had more fiscal headroom than anticipated, around £22bn. Fiscal headroom refers to the amount the government can spend before breaching its own fiscal rules, or put differently, the space available before deviating from the goal of achieving a balanced budget by 2029/2030. While the initial reaction was positive, credibility concerns emerged quickly due to the back-loaded nature of many tightening measures weighing on bond market performance.

Elsewhere, Japanese markets underperformed in November following the announcement of a large fiscal stimulus package. The Japanese 10-year government bond yield is now at a level last seen in 2008, and Bank of Japan is expected to hike rates in December. Up until March 2024, Japanese government bond yields had been artificially suppressed, but the subsequent move higher has exerted upward pressure on developed market yields globally.

In terms of portfolio positioning we view remain comfortable with our current allocations. Rising expectations for Fed cuts in December, has helped the performance of government bonds thus far this quarter, leading to an outperformance over corporate bonds. Despite this we continue to maintain an overweight allocation to corporate bonds. We view rising concerns surrounding government deficits and signs of inflation persistence as a risk to yields over the medium term and hence prefer to focus on high quality investment grade corporate bonds which offer higher yields but with a lower duration risk profile.

Elizabeth Geoghegan, Head of Fixed Income

Pluses and minuses for the dollar

The US dollar has been a substantial drag on euro-based portfolios in 2025. In the year to late November, the dollar is down 12% vs. the euro, having recovered slightly from its 14% decline in the first half of the year.  The world equity index, which has a heavy weighting towards the US, returned near 14% in gross local currency terms but when translated back to euro it has shown a more modest single digit return.

Looking ahead, the path of the dollar may continue to be an important influence. The currency has already fallen significantly enough that much of its theoretical over-valuation, in terms of purchasing power parity, has been eroded.  Fair value on this basis is around 1.20 per euro, although estimates do vary widely between 1.10-1.50, depending on method. On this basis, the dollar may now be less vulnerable, but the interest rate differential does continue to drift slowly away from its favour – the two-year US-German bond yield gap is now just under 1.5% compared to more than 2% at the start of the year. So, still some cause for concern.

On balance, there is reason to prefer stability to renewed decline. Historically the euro has rarely traded beyond the 1.20 level as long as the rate gap is in the dollar’s favour in absolute terms.  The Fed may need to cut rates a long way before a more meaningful dollar decline would be justified, in this context.  As US economic growth has proven repeatedly resilient, and the euro area continues to struggle to gain momentum, that seems unlikely.  On balance, we still think the dollar will hold the range it has been in for the past ten years.

Joe Prendergast, Head of Investment Strategy