Markets Unwrapped: November 2025
November began with a sharp uptick in market volatility, particularly across sectors tied to artificial intelligence (AI) (mostly US). Concerns about stretched valuations and increasing “bubble” commentary around AI-linked companies triggered an initial sell-off of around 5–6% before these stocks recovered later in the month as sentiment stabilised. A slowing inflation data from the US saw talks of a rate cut by the Federal Reserve in December (which came to fruition), and helped buffer the equity market to end the month. Performance in broader global equities was more influenced by investors reassessing central bank policy expectations and saw the major markets end the month relatively flat.
Despite the growing concerns around AI and stretched valuations, it was the Australian equity market that was hit the hardest, as headline inflation surged to 3.8% (outside the RBA target) and saw all talk of a rate cut dashed and replaced with expectations of an increase. Markets are currently pricing in an increase to 3.85% by late next year. It continued to be the materials sector that performed during November.
The surging headline inflation in Australia saw the bond yields push higher, as the outlook for the cash rate turned. Although it is the quarterly inflation figure that is more important, all signs point to this being accurate as the increase was primarily due to the government rebates on electricity rolling off.
Tariffs continue to flow into the US, with most of the impact being felt by the non-ai part of the economy. Despite inflation also still above target range, the Fed cash rate is on a downward trajectory, to help support this part of the economy being hit by tariffs.
Overall conditions were mixed through the month, and there continues to be no clear trend on the path forward. This would continue to suggest large volatility in the short term until there is more certainty around both the global and domestic economy.
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