Market Recap & Outlook: Your Weekly Market Compass – November 21 2025

U.S. Stocks: Strong Friday Rally, Weak Week

For the week ending Friday, November 21, 2025, U.S. equities delivered a classic "bad week, good close" pattern. After a sharp sell‑off on Thursday, equities staged an impressive rebound on Friday, but not enough to avoid meaningful weekly losses.​

Weekly Index Performance (Week Ending November 21, 2025):

• S&P 500: approximately −1.8% for the week​

• Nasdaq Composite: roughly −2.5% for the week, the weakest of the major indices​

• Dow Jones Industrial Average: approximately −1.9% for the week​

Losses were once again concentrated in technology and large‑cap growth stocks, particularly within the AI complex, as investors questioned how long extraordinary spending on AI infrastructure can outpace realized returns. More defensive and value‑oriented sectors generally held up better, but offered limited shelter from the broader de‑risking trend.​

Globally, risk appetite weakened as well. World and emerging‑market benchmarks were on track for weekly declines, with Asian markets especially sensitive to renewed concerns about tech valuations and mixed signals on the Fed's path.​

Macro & Fiscal Policy: After the Shutdown, Growth Reaccelerates but Confidence Sags

With the federal government now fully reopened after the historic 43‑day shutdown, incoming data and surveys are beginning to show the contours of the post‑shutdown economy. High‑frequency indicators and early growth estimates suggest that U.S. activity is rebounding as agencies resume normal operations and delayed spending and hiring gradually flow back into the system.​

At the same time, sentiment remains fragile. The University of Michigan's consumer confidence index fell further in November to around 51, with households citing persistent worries about prices and job security despite the improved headline growth backdrop. The shutdown's drag on fourth‑quarter GDP is still expected to be meaningful, but markets are increasingly focused on whether the rebound phase can sustain into 2026 without renewed policy or political disruptions.​

The AI Centerpiece: Nvidia's Blowout Quarter vs. Bubble Fears

Nvidia  delivered another extraordinary quarter, underscoring the still‑powerful fundamental story behind the AI build‑out. Third‑quarter revenue surged to roughly 57 billion dollars, up about 62% year‑over‑year and comfortably ahead of consensus expectations. Net profit jumped approximately 65% to nearly 31.9 billion dollars, marking one of the strongest earnings performances in global equity markets. Management guided fourth‑quarter revenue to about 65 billion dollars—again above already lofty expectations—highlighting that cloud and data‑center demand for AI accelerators remains exceptionally strong.​

Despite these stellar fundamentals, the stock's price reaction was notably muted to negative. Nvidia shares rallied in after‑hours trading on the day of the release but ended Thursday down more than 3%, and finished the week modestly lower as investors used strength to take profits and reassess AI‑related risk. Other major AI and cloud beneficiaries, including Microsoft  and Oracle , also traded lower, reinforcing the sense that AI leadership is in a valuation‑driven consolidation phase rather than a clean continuation of 2025's earlier melt‑up.​

The key takeaway: earnings and guidance from AI leaders remain exceptional, but the market is increasingly unwilling to pay any price for that growth. Even very strong quarters are now being met with skepticism and position‑trimming rather than euphoric buying.​

Valuation Focus: Elevated Multiples and the Cost of Disappointment

Market volatility is occurring against a backdrop of historically rich valuations. As of October month‑end, the S&P 500's trailing P/E ratio sits near 27.9x, while the Shiller CAPE ratio hovers around 40, levels well above long‑term norms. The implied earnings yield near 3.6% offers only a modest premium over intermediate‑term Treasury yields, which remain around 4%.​

Using the same forward earnings framework as last week, and assuming forward earnings estimates are broadly unchanged, the forward 12‑month P/E for the S&P 500 remains in the low‑20s—around 23x—versus a 10‑year average closer to 18.6x and a 25‑year trailing average of roughly 16.3x. On that basis, Friday's closing level implies a meaningful valuation premium.​

Holding earnings constant, approximate price moves needed to "re‑rate" the index back toward historical averages are instructive:

• To align with the 10‑year forward P/E average (18.6x), the S&P 500 would need to fall on the order of 19–20% from current levels.

• To converge toward the 25‑year trailing average (16.3x), the required drawdown would be closer to 28–30%.

These rough calculations are not forecasts, but they highlight how much optimism is currently embedded in index‑level pricing. Any material negative surprise in growth, profitability, or policy could drive a non‑trivial valuation correction, especially in the mega‑cap technology and AI complex that has disproportionately powered recent gains.​

The alternative, more benign path remains "growing into" these valuations—where earnings continue to compound at above‑trend rates while prices move more modestly, allowing multiples to drift lower over time without a deep price correction. Nvidia's current trajectory exemplifies this possibility, but the breadth and durability of such growth across the broader market are still in question.​

Federal Reserve & Fixed Income: Rate‑Cut Odds Whipsaw, Then Rebound

The most important macro development this week was the continued repricing of Federal Reserve policy expectations. After hawkish commentary in prior weeks had dragged market‑implied odds of a December rate cut down toward roughly 40%, Friday's remarks from New York Fed President John Williams helped reverse the trend.​

Williams suggested that another reduction in the policy rate could be appropriate in the "near term," language that markets interpreted as an endorsement of a December cut. Futures markets quickly repriced, pushing the implied probability of a December cut up toward roughly three‑quarters, from around 40% just a day earlier.​

At the same time, Fed officials more broadly remain divided. A mixed U.S. labor market report offered limited clarity, showing neither the kind of sharp cooling that would force an urgent easing, nor the kind of reacceleration that would slam the door on further cuts. As a result, rate expectations continue to oscillate around incoming data and Fed communications, contributing to elevated day‑to‑day volatility in both stocks and bonds.​

Treasury Yields Ease Late in the Week

Treasury yields, which had moved higher earlier in the month as markets priced out some easing, edged lower again by week's end. The 10‑year Treasury yield drifted back toward roughly 4.05%, helped by the softer risk tone and the prospect of renewed Fed accommodation.​

The curve remains relatively flat, reflecting ongoing uncertainty about the medium‑term growth and inflation mix. With consumer confidence weakening and real‑time indicators of activity mixed, bond investors are balancing the risk of a slower economy against the possibility that inflation proves sticky enough to limit the Fed's room to cut.​

Economic & Corporate News: Solid Micro, Softer Confidence

Economic Data: Growth up, Confidence Down

Beyond the Fed narrative, the most notable macro developments were:

• Growth Reacceleration: Early reads suggest U.S. economic growth is rebounding as the post‑shutdown economy normalizes, with businesses gradually restoring delayed hiring and investment.​

• Softening Sentiment: The University of Michigan's November confidence reading fell further to around 51, signaling that households remain wary of elevated prices and potential job losses despite the improving growth backdrop.​

• Mixed Labor Market Signals: The latest jobs report was neither strong enough to fully dismiss recession risk nor weak enough to guarantee a December cut, leaving investors and policymakers alike with an ambiguous signal.​

Corporate Earnings: Retailers and AI in the Spotlight

Earnings season is winding down, but several key companies reported results that provided important read‑throughs on both the consumer and the AI cycle:

• Walmart : Shares surged about 6.5% after the retailer delivered better‑than‑expected quarterly results and raised its full‑year outlook, reinforcing the resilience of value‑oriented consumer spending.​

• Other Retailers: Gap, Ross Stores, and BJ's Wholesale all traded higher following earnings, suggesting that while discretionary spending is more selective, the consumer backdrop remains far from recessionary.​

• Nvidia and the AI Complex: As discussed, Nvidia's exceptional quarter did not prevent a broader AI‑related selloff, underscoring that investor anxiety is now focused more on sustainability and valuation than on near‑term fundamentals.​

Crypto markets provided a contrasting signal on risk appetite. Bitcoin  traded as low as the low‑80,000s during the week and is on pace for its worst monthly performance since the 2022 crypto crash, reflecting both profit‑taking and general risk aversion in more speculative corners of the market.​

International Markets: Global Tech and Fed Uncertainty Weigh on Risk Assets

International equities largely followed the U.S. lower, with global benchmarks pressured by the same concerns over AI valuations and the Fed's uncertain path. Asian markets, in particular, extended losses as investors sold down high‑beta tech and growth names that had benefited from the AI theme.​

European equities fared somewhat better but still ended the week under pressure, with cyclical exporters sensitive to both a slowing global goods cycle and the possibility that the Fed's next steps could tighten global financial conditions if markets have mis‑priced the path of U.S. policy. Emerging markets broadly declined, reflecting a combination of weaker risk sentiment, a softer tone in global trade, and sensitivity to any renewed dollar strength tied to Fed repricing.​

Bond Market Performance: Yields Lower, Spreads Still Contained

Fixed income markets reflected a more cautious but not yet panicked environment. As Treasury yields dipped late in the week, high‑quality bond benchmarks stabilized, and credit spreads widened only modestly. Investors remain more selective in lower‑rated credit, but there is no sign yet of a broad‑based funding stress or systemic credit event.​

The combination of an earnings yield near 3.6% on the S&P 500 and Treasury yields around 4% has kept the equity risk premium compressed, reinforcing the sensitivity of equity valuations to even modest moves in the risk‑free rate. In this environment, balanced portfolios and duration management remain key levers for navigating elevated volatility.​

Looking Ahead: Thanksgiving and Beyond

With Thanksgiving week upon us, markets will face a lighter calendar as many participants step away from their desks to spend time with family and friends. Happy Thanksgiving to all our readers. The compressed trading week should provide some breathing room after the volatility of recent sessions, though liquidity may be thinner than usual and positioning changes ahead of the holiday break could generate sharp intraday moves.

When markets reopen, the focus will return to economic data, Fed communications, and corporate guidance heading into year-end. The post-holiday stretch—from late November through December—traditionally carries elevated importance for policy-sensitive and growth-dependent equities. Investors should use this quieter week to review their positioning, rebalance if needed, and ensure their portfolios are appropriately calibrated for a potentially volatile final month of the year.

The Bottom Line: Volatility, Valuation, and a Narrow Leadership

This week reinforced several key themes for investors:

• Index‑level performance can mask significant underlying stress. The S&P 500 finished the week down roughly 2%, but leadership remains narrow and increasingly fragile, centered on a small group of richly valued AI and mega‑cap technology names.​

• Policy expectations are driving frequent, sharp reversals. A single Fed speech was enough to swing December rate‑cut odds from near 40% to roughly 75%, with corresponding moves across equities, bonds, and currencies.​

• Valuations leave little margin for error. With the S&P 500 trading near the high‑20s on a trailing P/E basis and the Shiller CAPE around 40, even excellent earnings from AI leaders are no longer sufficient to guarantee positive price reactions.​

For investors, the message is clear: prepare for continued volatility. Portfolio resilience—through diversification across styles and regions, careful risk budgeting, and an emphasis on quality balance sheets—remains essential in an environment where both earnings and policy are strong, but valuations leave little room for disappointment.