Sour Start to the Sweet Season.

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In direct defiance of lore, markets ended spooky season at all-time highs after a more than six-month ascent off early April lows. Technically, these strong uptrends represent volatility as much as big down swings do – even if it’s way more fun on the upside.

November, on the other hand, is traditionally the start of a merry period marked by a so-called Santa Claus rally (year end positioning and tax trading) that dominates activity. However, in classic through-the-looking-glass-fashion, this time the month started on a sour note – until rumors of a deal to reopen the government emerged. We are not quite sure if market participants were truly that invested in the actual shutdown process itself. Maybe they were simply looking for an excuse to get back on the up-market train after the recent pullback. When putting a coherent framework around the last few weeks of trading, it’s helpful to consider a number of factors:

The default gear for both the economy and the markets over the long haul is up and to the right – The dynamism that has dominated the U.S. system for decades shows up in largely consistent GDP, productivity and market growth.

Pullbacks are normal – While long-term trends are overarchingly constructive, the path is not a straight line. Those who want to benefit from the long-term trend must always be prepared (both fundamentally and psychologically) for potential interim pullbacks and downswings; they happen nearly Every. Single. Year.

Keep emotions out of it – We are hardwired to react poorly to unpredictable environments. The fight, flight or freeze response is quite literally how our ancestors handled saber-toothed tiger attacks and lived to tell the tale. On the other hand, that same hardwiring does not serve us well in highly unpredictable market environments. When we confront new information, it helps to remember that there is a clearing price for every asset on any given day, but no one cares what you paid. Today’s price is about how badly the seller wants/needs out or how badly the buyer wants in. We humans stand apart from other species based on our capacity to pause between stimulus and response reactions. Make ample use of those pauses to breathe and calmly consider multiple angles and arguments. We will kickstart the process by offering a few examples.

When bad news is (and isn’t) good news. Since U.S. government statistics mills shut down on October 1, policy makers and investors have been forced to rely on alternate sources of data to gauge the economy’s progress. Even StatCan was unable to issue trade data reports, hampered by an absence of info from U.S. federal agencies. Unfortunately, many of the feeds we’ve been getting have been incomplete or in conflict. ADP monthly employment data showed gains in job openings, for example, while weekly data show weakness. Manufacturing activity has flashed conflicting signals (one indicator showed strength, another weakness). Recent University of Michigan consumer sentiment readings revealed a wide bifurcation in optimism (or lack thereof) between those in the top tier (who own the bulk of financial assets) and all others. Data from a different source turns up yet another divergence.

Investors have been trying to decide if bad economic news is actually bad for markets, or if it might ironically be constructive. For example, one line of reasoning holds that softer employment and slower growth should keep the Fed cutting rates, which will boost growth at some point and lead to higher stock and bond prices. (Poor economic news that is constructive for potential market action.) Similarly, fundamentals hinting at growth that is accelerating too rapidly are derided rather than applauded for their potential to slow rate cuts and boost longer-term yields. (A case of good economic news being less helpful from investors’ vantage.) Looking longer term (a.k.a. longer than next week), markets tend to revert to following long-term fundamentals. Toward that end (and contrary to many headlines) we note:

A recent article from Bloomberg reported that “mentions of ‘economic slowdown’ and synonyms during sales, guidance and earnings calls… are the lowest since 2007.”

Although the IMF’s global policy uncertainty index is near an all-time high, it noted that global economic optimism remains robust. (Seems there is energy and opportunity in dramatic change as shifting policies reorient the global order.)

Bloomberg statistics show that, based on more than 90% of company results, aggregate revenues are up 8% while earnings have advanced 12%. Impressively, participation is broad: 10 of 11 sectors show gains (tech, financials, materials each around 20%). Even this far along into a well-developed economic cycle, companies are finding ways to magnify solid revenue growth into higher bottom line progress via astute attention to precision margin management. Current broad expectations are for double-digit earnings growth in Q4, moving into 2026.

Globally,too, things are looking solid. In China, for example, we see early indications that sales from “Singles’ Day” were strong (China’s day-long shopping fest that dwarfs Black Friday and Cyber Monday in the U.S.). One of the country’s largest online retailers noted a 60% increase in orders compared to last year. In Canada, despite repeated trade-war wallops from the country’s southern neighbor, employment and consumer progress have actually been sturdier than expected. There may even be room for further improvement if Prime Minister Mark Carney’s new budget (heavy on fiscal stimulus) is approved.

Tax benefits for consumers from the One Big Beautiful Bill Act (OBBBA) are just around the corner. There is a little something for everyone, including expanded SALT (state and local tax) deductions for mid-level individuals and no tax on tips, Social Security or overtime for others.

Financial market activity itself remains robust and supportive. Merger & Acquisition (M&A) transactions are increasing – and are often larger. The current administration is supportive of larger tie-ups and is working to reduce regulation and streamline regulatory approvals. The IPO market, which had shown distinct signs of life prior to the government shutdown, could see a set of higher profile offerings (recently stalled on the sidelines) come to market.

Implications for investors :

Investors are on edge. Markets are entering the final stretch after posting double digit increases (for the third year running) with full valuations. Sentiment remains susceptible to unexpected or unwelcome headlines. It’s helpful to keep in mind that such short-term whipsaws are the admission price for participation in markets’ long term growth. Remembering markets’ tendency toward the long term, plus a variety of supportive economic and market fundamentals, should provide plenty of constructive chess moves to consider.

 

Source: BMO Private Wealth: Weekly Strategy Perspectives Week Ended November 14, 2025

 

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