Clime Economic and Market Commentary – November 2025

November marked a consolidation of the strong gains achieved by most global share markets over the last six months. Concerns about elevated valuations, increasing inflationary pressures, central banks tempering expectations for rate cuts, and higher volatility indicators combined to dampen overall bullish sentiment.

Global share markets were mixed across the month. The key US index, the S&P 500, was broadly flat for the month (up approximately 0.1%) yet it remains up around 16% year-to-date (YTD). The Dow Jones Industrial Average gained around 0.3% in November and is up approximately 12% YTD. The Nasdaq lagged, declining roughly -2.4% for the month but still delivering a strong gain of around 21% YTD.

Japanese stocks, where the Nikkei 225 had spiked 18% in October, gave back 4%, still leaving the index up 24% YTD. European markets were broadly stable in November yet show excellent gains for the year-to-date. Notable YTD performances include Britain up approximately 19%, Germany around 19%, Italy in the mid-20s percentage range, and Spain up over 40%.

The Australian share market has lagged many developed peers this year, for reasons covered in previous editions. The ASX 200 declined about -2.7% in November and is up approximately 5% YTD.

In the United States, Economic Data Is Resilient.

With the new year fast approaching, the US economy looks reasonably resilient, in contrast to a predicted recession one year ago. There has been a massive boom in Artificial Intelligence (AI)-related investments, certainly the most remarkable feature of this year, and yet uncertainties caused by President Trump’s tariffs and other policies, and disruptions to official employment and inflation data following the longest-ever government shutdown, have clouded the economic and financial outlook. The big question now is what 2026 will bring.

There are numerous possible scenarios. In the baseline case, the US will experience a period of below-trend GDP growth for a few months, followed by a recovery and a gradual decline in the inflation rate toward the US Federal Reserve’s 2% target. This appears to align with current market expectations. In a second scenario, the economy experiences a shallow recession for a couple of quarters, requiring aggressive rate cutting by the US Fed, followed by a slower return to growth than in the first scenario. Another scenario features a “no-landing” outcome in which growth stays strong, but inflation does not fall toward the target rate. We think the first scenario is the most probable.

Despite the noise of the daily news cycle, the US economy has much going right for it at present. We expect a number of positive tailwinds: further monetary easing by the Fed; fiscal stimulus that is still in the pipeline (most of the recently legislated spending cuts will not occur until after the 2026 midterm election); strong household and corporate balance sheets; favourable financial conditions (owing to high equity prices, low bond yields and credit spreads, and a weaker US dollar); and strong capital expenditures relating to AI. Moreover, inflation may peak and then start to fall next year as the base effects of tariffs wane, and as technology-driven productivity gains reduce costs and unlock new efficiencies.

However, there are always caveats to this “Goldilocks” scenario: various geopolitical headwinds – like a worsening of China-US trade tensions, or a new expansion of the Russia/Ukraine conflict that spills across more Eastern European countries, further fighting in the Middle East that causes oil prices to spike, or even a US attack on Venezuela – could always push the global economy into the recession scenario. Fortunately, such shocks have largely been contained, and we hope they remain so. But as we’ve often said, high valuations mean that any potential correction could be severe.

Australian Economic Data

The November CPI release from the ABS was a negative shock for the market, and probably the primary reason for the ASX underperforming its global counterparts. Data showed headline inflation rising to 3.8% in the 12 months to October, up from 3.6% in September. The increase was broad-based, with the biggest contributors including housing (+5.9%), food and non-alcoholic beverages (+3.2%), and recreation and culture (+3.2%). Underlying inflation, as measured by the trimmed mean, also rose to 3.3% from 3.2% the previous month.

From a macroeconomic and monetary-policy perspective, the 3.8% outcome, together with sticky core inflation, casts doubt on the likelihood of further rate cuts in the near term. With inflation running materially above the target band of 2-3% for both headline and underlying measures, the Reserve Bank of Australia (RBA) now seems likely to keep interest rates on hold for an extended period. There is even talk of a pivot toward tightening, but we think this is unlikely.

As noted above, the ASX 200 index fell in November, with the ASX 200 down -2.7%, the weakest monthly return since the tariff tantrum in early 2025. The selloff was driven by a hawkish shift from the RBA following the inflation print. Meanwhile, gold-exposed equities continued to outperform, supported by commodity strength and safe-haven flows—although gains are better described as strong double digits over the past 12 months rather than uniformly doubling.

The health sector was the second-best performer, with a gain of +1.7%. This was driven by pharmaceuticals (+3.0%) and a near 5% gain in CSL. Technology was the worst performer, with a loss of almost 11%. Forward EPS forecasts for the Tech sector reduced nearly 9% last month. Over the course of November, the forward PE ratio fell from a high of over 20x to around 18.3x. This is still well beyond the average long-term forward PE ratio of the market of around 14.5x. The expected dividend yield for the next 12 months is 3.5%.

The positive seasonality we usually see in November did not occur, in part because of the CPI shock, but also contributing was the extended US shutdown and a more hawkish tone from the Fed.

Bond Markets, Currencies and Commodity Prices

The US 10-year Treasury yield was back above 4% as investors recalibrated expectations for the timing and size of future cuts. Investors focused on Fed Chair Powell’s comment that another cut this year is not a “foregone conclusion.” The 10-year Treasury note finished the month at 4.09%. The Australian 10-year bond was sharply higher, above 4.55%, reaching its highest level since mid-January. The increase in yield was prompted by fading hopes of further policy easing. Latest data show that the manufacturing PMI rose to a three-month high in November, while job ads declined at a slower pace. This follows the persistently high inflation report noted earlier.

Not surprisingly, with their central banks in dissimilar stages of monetary policy, the Australian dollar steadied around $0.654, supported by robust economic data that has heightened some expectations of potential interest rate hikes by the RBA next year.

Market attention will now turn to the third-quarter GDP release, with forecasts suggesting that strong economic growth could intensify speculation about a rate hike in 2026. Externally, the Australian dollar received support from a weakening US dollar, as markets now price in an 80% chance of a 25-bps cut at the Fed’s policy meeting on 10 December.

Commodities markets were stronger, with silver, platinum and gold all sharply higher. Silver is up 80–90% YTD; gold approximately +61%; platinum up ~73–85% and continues to benefit from structural demand strength and is up around 25–30% YTD, while lithium has also posted a recovery of just over 20%. As noted previously, with risks of a global recession having fallen away since the beginning of the year, the diversification benefits of commodities are becoming more attractive and precious metals offer haven benefits.

Iron ore managed to hold above the US$100/tonne level, but the price of a barrel of oil was weaker, with Brent at $63/Bbl. (down 13-14% YTD).

Conclusion

A mixed month of gains on commodity markets but consolidation on share markets, and volatility in bonds. Sticky inflation is creating uncertainty amongst central bankers, and we expect that the RBA will not follow the Fed with a further cut in rates anytime soon. As markets are still relatively expensive, we reiterate the importance of prudent stock selection based on fundamental metrics rather than jumping onto the long momentum trade.