Market and economic commentary
November 2025

November saw a period of market turbulence, with global equities experiencing a small setback. This was a notable time where robust earnings and strong consumer activity coexisted with increased market volatility and isolated selloffs. The Federal Reserve is now being prompted by a mixed jobs report to consider its next steps before year-end. 

The Compass Portfolios were flat over the month. Of the ATB Pools, all the pools were positive with the exception of the ATBIS International Equity Pool. Up-to-date performance data for the Funds can be found here.

Index performance

Below are index one-month total returns in Canadian dollar (CAD) terms for November:

Earnings and the resilient consumer

With Q3 earnings in the rearview mirror, US companies deserve the spotlight for smashing expectations yet again. Results came in strong with +14.7% year-over-year (YoY) earnings growth, with 10 out of the 11 sectors beating expectations. This capped off the fourth consecutive quarter of double-digit earnings growth. While this level of growth will inevitably taper off to more sustainable levels, the praise today has certainly been earned. 

November was a boon for retailers counting on the consumer renaissance. Despite some media efforts to paint a negative narrative on consumers with grassroots boycott efforts, none of that materialized. Rumours of a consumer demise have been greatly exaggerated. Black Friday broke all records, with early reports suggesting US online sales amounted to $11.8b, representing a +9.1% YoY increase. This strong performance was not isolated, as global online sales exceeded $79b, up 6% YoY. 

Unpacking market volatility

So, with that as a backdrop, what happened to the markets? After the dust settled, it seems that expectations in the mega-cap AI space became “too perfect.” While we acknowledge that the current rate of growth at the top of the market cannot be sustained forever, it seemed unlikely that was the main culprit, given the exceptional performance recently delivered (e.g., NVDA +60% YoY EPS). 

Markets rarely stay one-directional forever. This volatility episode appears to be just that—markets taking a breath. There were hints of short sellers and the unwinding of trades from leveraged positions, fuelled by the proliferation of leveraged ETF/ETP products. Once a renowned short seller, Michael Burry (of GFC ‘08 “Big Short” fame), went public with their positions, this snowballed into a period of profit-taking and selling pressure. 

Aside: It should be noted that Michael Burry may be past his prime. He announced the closure of his short-biased hedge-fund and de-registered with the SEC after suffering a string of losses following the public disclosure of his short positions.

By the last week of November, a recovery rally was already taking place. In the aftermath, we saw Canada outperform the world on the back of gold and banks punching above their weight. EAFE also saw a bright spot, as investors are attracted to the region for reasons other than purely growth. The two earnings and high-growth markets—the US and Emerging Markets—ended up in the rear. 

When we examine the market action, we note that this was not a broad market selloff. Instead, we saw a rotation away from high-beta growth/AI names to a more value and defensive side of the market. In effect, it was a catch-up trade that was overdue as the AI trend was put on a temporary pause in a bull market. The Q3 earnings results hinted at this with broad-based earnings strength, but much of the price appreciation this year had been captured by the mega-caps. November saw a bit of a leadership rotation and market broadening. Ultimately, this should be viewed as a positive signal in a bull market for investors. 

The volatile period in November created a buying opportunity for equities in our portfolios. While we acknowledge valuations were not as attractive as earlier in the year, we were comfortable buying at these levels. These “almost” corrections are great opportunities to buy equities at a small discount. 

Fixed income

Fixed income turned up a quiet month in November with no policy action from the Federal Reserve or Bank of Canada. The Canadian Bond Universe was largely flat to slightly positive, and the duration trade was innocuous—investors were indifferent to the long or short end of the curve over the month. With no recession on the horizon, credit markets continue to do well despite spreads near all-time tights. The additional credit spread offered by corporate bonds continues to maintain its outperformance over government bonds yet again. 

Compass Portfolios Series F1 - Returns net of fees

ATBIS Pools Series F1 - Returns net of fees