We don\u2019t view the pullback as a bursting stock bubble, but rather a healthy reset following a sizeable advance.<\/p>\n\n\n\n
Hawkish commentary from the Federal Reserve wasn\u2019t expected. Policy uncertainty has tended to amplify volatility.<\/p>\n\n\n\n
We believe market leadership has the potential to broaden to cyclical sector, value-oriented, and smaller-cap stocks.<\/p>\n\n\n\n
Investors had appeared to be steeling themselves for a market pullback. After a nearly uninterrupted 38% advance from the Liberation Day bottom on April 8,1<\/a><\/sup> conversations about a stock bubble and stretched valuations have grown louder. That backdrop may have made last week\u2019s pullback feel inevitable. The unwind was concentrated in mega-cap growth names, the very stocks that powered the rally.2<\/a><\/sup> Ironically, many of these companies, including Netflix, Palantir, Microsoft, and Alphabet, delivered strong earnings beats, yet their shares faltered. To us, this isn\u2019t about broken business models but rather skepticism toward lofty valuations. That\u2019s why we don\u2019t view it as the bursting of a stock bubble but rather as a healthy reset following a sizeable advance.<\/p>\n\n\n\n Looking beyond valuations, policy uncertainty tends to amplify market volatility. While the government shutdown<\/a> captured much of the recent attention, the greater source of uncertainty has been the split in the Federal Reserve<\/a> (Fed), which delivered more hawkish commentary than investors anticipated. It may have been easier for the Fed to adopt a less dovish tone during a period when official economic data was unavailable.<\/p>\n\n\n\n The US government has reopened, finally, and data releases will resume, but greater clarity won\u2019t be immediate. The September US data will be released shortly \u2014 assuming the government IT department can quickly deal with all the \u201cI\u2019ve forgotten my password\u201d requests. But the October data will likely be highly compromised or lost to time. The data collection process is highly manual, so much can\u2019t be retroactively collected. That\u2019s why we believe October and November\u2019s official data should likely be treated with skepticism.<\/p>\n\n\n\n This leaves an already split Fed still relying on alternative data to make its December decision. Private sector labor market data has pointed to softness but not collapse.3<\/a><\/sup> We think that\u2019s enough to cause the Fed to likely err on the side of further easing. Other data that we trust continues to point to a robust corporate sector. Companies continue to report earnings growth better than consensus forecasts.4<\/a><\/sup><\/p>\n\n\n\n Meanwhile, the end of the shutdown means employees will receive back pay, and federal layoffs will be reversed. It also appears that Transportation Security Administration (TSA) officers, who worked without pay during the shutdown, will receive $10,000 bonus checks. That means federal workers should be able to spend on Thanksgiving, Christmas, and other holidays, but we\u2019ll be watching for signs in consumption data throughout the holiday month.<\/p>\n\n\n\n In our mind, this leaves the backdrop for risk assets still favorable. Yields are low,5<\/a><\/sup> oil prices6<\/a><\/sup> and inflation<\/a> expectations remain contained,7<\/a><\/sup> our Global Leading Economic Indicator points higher,8<\/a><\/sup> and a US monetary policy easing cycle has commenced. Monetary easing, combined with ample fiscal support next year, should help the US economy regain momentum. In a recovery phase, we believe market leadership is likely to broaden beyond mega-cap growth. Cyclical sectors, including financials (large banks have had strong performance recently9<\/a><\/sup>), along with value-oriented and smaller-cap stocks, have the potential to participate more meaningfully, in our view. Additionally, non-US dollar assets stand to potentially benefit as global growth stabilizes and policy divergence narrows.<\/p>\n\n\n\n We remain mindful of valuations, but don\u2019t believe this is a bubble. Instead, we see an opportunity for investors to position portfolios toward better valuation profiles and cyclical exposure as the recovery unfolds.<\/p>\n\n\n\n —<\/p>\n\n\n\n Originally Posted on November 17, 2025 <\/p>\n\n\n\nPolicy uncertainty<\/strong><\/h2>\n\n\n\n
Post-shutdown data<\/strong><\/h2>\n\n\n\n
Still favorable backdrop<\/strong><\/h2>\n\n\n\n
What to watch this week<\/h4>\n\n\n\n
Date<\/th> Region<\/th> Event<\/th> Why it matters<\/th><\/tr> Nov. 17<\/td> US<\/td> Empire State Manufacturing Survey<\/td> Provides insight into New York manufacturing activity, a leading indicator for the sector<\/td><\/tr> <\/td> US<\/td> Survey of Professional Forecasters<\/td> Offers expectations on growth, inflation, and unemployment, influencing market sentiment.<\/td><\/tr> Nov. 18<\/td> US<\/td> Industrial production and capacity utilization<\/td> Key measure of output and resource use, signals economic strength or weakness<\/td><\/tr> <\/td> US<\/td> Business Leaders Survey<\/td> Reflects business confidence and outlook, important for investment trend<\/td><\/tr> Nov. 19<\/td> US<\/td> New residential construction<\/td> Tracks housing starts and permits, a major driver of economic activity<\/td><\/tr> <\/td> US<\/td> Federal Open Market Committee (FOMC)Meeting Minutes<\/td> Provides detailed insight into Fed\u2019s policy discussions, critical for rate expectations<\/td><\/tr> Nov. 20<\/td> US<\/td> Philadelphia Federal Reserve Manufacturing Survey<\/td> Regional manufacturing health indicator, impacts US dollar and stock markets<\/td><\/tr> <\/td> US<\/td> Existing home sales<\/td> Shows housing market strength, which influences consumer confidence and spending<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n