Sorry, Moonvember hopefuls, macro uncertainty signals sideways month for markets.
As November progresses, investors hoping for a strong end to the year may need to temper their expectations. A confluence of macroeconomic uncertainties suggests that markets are likely to trade sideways, lacking a clear directional catalyst. While October saw some positive momentum, fueled by easing interest rates and resilient earnings, several factors are now pointing towards a more cautious outlook.
One of the primary headwinds is the persistent uncertainty surrounding inflation. The Consumer Price Index (CPI) accelerated to 2.9% annually in recent months, driven by housing and services. The annual inflation rate for the United States was 3.0% for the 12 months ending September. The Federal Reserve's preferred target of 2% remains elusive, leading to speculation about the timing and extent of future rate cuts. Recent comments from Fed Chair Jerome Powell have further dampened expectations of imminent easing, emphasizing the need for more data to confirm that inflation is truly under control. The U.S. Consumer Price Index (CPI) report due on November 13, 2025, will be a major catalyst for the markets this year.
Geopolitical tensions add another layer of complexity. Emerging markets are facing decelerated growth amid rising protectionism, influencing global economic forecasts. A potential misstep in the Taiwan Strait or a cyberattack on critical infrastructure could trigger outsized market reactions. These events inject volatility and make it difficult for investors to confidently price assets.
Domestically, the United States faces its own set of challenges. The Conference Board anticipates U.S. GDP growth to slow to 1.6% for the full year. Effects of Artificial Intelligence (AI) on the workforce started to appear in October with multiple companies announcing major layoffs of white-collar workers. The OECD sees GDP slipping to 1.6% in 2025, while the Fed delays rate cuts.
Despite these headwinds, there are some factors that could provide support to the market. The US Dollar and stocks rallied. Spending related to AI is thought to account for more than half of US growth this year. The Senate advanced a bill to end the 40-day shutdown.
From a technical perspective, the market may simply need time to digest recent gains. Valuations are stretched, and the S&P 500 is heavily reliant on tech giants, leaving it vulnerable to shocks. A pullback in major AI names has already sparked concerns about frothy valuations.
Given this backdrop, a sideways trading pattern appears to be the most likely scenario for Moonvember. Investors should focus on diversification and risk management, avoiding the temptation to chase fleeting trends. Keeping a close eye on upcoming economic data releases, including the CPI report and Fed meetings, will be crucial for navigating the market in the weeks ahead. While the potential for significant upside may be limited, a disciplined approach can help investors preserve capital and position themselves for future opportunities.
