Stock Market Recap - November 2025

Summary

• Investors bought low-valuation AI names in SMID during the month.
• High-quality AI stocks and unprofitable small-cap AI names outside the S&P 1500 were both sold off.
• Claims of broad AI overvaluation are not supported by the data.
• The Fed’s hawkish stance contributed to the month’s market pullback.
• November’s consolidation removed excess froth and broadened into non-growth AI names, setting the stage for a more sustainable bull run.
  

Sector Dispersion Dominates

All market segments suffered drawdowns in November, but a V-shaped recovery helped recoup some of the losses.

Value generally outperformed growth, and SMID outperformed large caps, but sector made the biggest difference: Health Care ended the month as the top performer, up 9.3%, while technology was the worst performer, down 4.8%.


(Source: Yahoo Finance; BAS calculation)

Is This an AI Sell-off?

Despite headlines characterizing November’s pullback as an AI bubble burst, the data says otherwise. Investors actually bought low-valuation AI names in SMID while heavily selling AI stocks outside the S&P 1500, which are typically the unprofitable, speculative names we highlighted in last month’s market recap.


(Source: S&P; Goldman Sachs AI Baskets; BAS calculation)

Are High-Quality AI Stocks Getting Too Expensive?

The generalized narrative that AI stock valuations are overstretched isn’t supported by the data either. Many of the Mag 7 names trade at lower forward P/Es than consumer companies like Walmart and Costco. WMT gained 9.2% in November despite its higher valuation and much lower profit margin.

(Source: Yahoo Finance; Goldman Sachs AI Baskets; BAS calculation)

Did the Fed Contribute to the Sell-off?

The Fed's hawkish tone in October clearly pivoted the market - the Nasdaq peaked that same day, and defensive industry like Pharma stocks have jumped since then. 
(The odds of a 25bp cut in December are currently 87.4%.)

November: A Healthy Breather for the Bull Run

As noted last month, unprofitable small-cap AI names had become frothy. November’s consolidation removed that excess and broadened leadership into non-growth AI names, setting up a more sustainable bull run.

Bitcoin and Gold

Bitcoin, as a high-beta, high-risk asset, unsurprisingly declined sharply in November, sending its price back to near the April lows. 
Gold, on the other hand, has held up well.

(Source: Yahoo Finance; BAS calculation)

Asset Returns

Year-to-date, equities - U.S. or international (EFA, EEM), public or private (CPEFX) - have delivered strong returns. Bonds held up well in November, with EM bonds (VWOB) outperforming EM equities (EEM). Catastrophe bonds (XILSX) and managed futures (DBMF) provided uncorrelated returns, while some alternatives came under pressure.

(Source: Morningstar; BAS calculation)