November review: Fading hopes of Autumn

“One of the most important lessons I have learned is that a valuation that is not backed up by a story is both soulless and untrustworthy and that we remember stories better than spreadsheets.”
— Aswath Damodaran, preface of Narrative and Numbers: The Value of Stories in Business, published on 10th January, 2017.

The US equity landscape shifted in November as the government shutdown disrupted the steady rally that began in late August. While the S&P 500 eked out a 0.13% gain to extend its 7-month winning streak, this masked aggressive sector rotation. Investors exited high-valuation technology stocks, triggered by risk re-ratings in specific companies, and sought refuge in defensive financials and industrials. Additionally, a dramatic 5.5% late-month surge in the Russell 2000 signalled a significant broadening of market breadth and renewed confidence in domestic economic resilience.

European equities outperformed, buoyed by favourable valuations in Financials and Healthcare. The market's central AI narrative also matured, moving from unbridled optimism to skepticism regarding CapEx returns. While ‘AI Adopters’ faced pressure to demonstrate utility, ‘AI Enablers’ maintained fundamentals’ strength. This bifurcation indicates a market increasingly prioritising profitability and durable moats over speculative growth as the cold winter of reality approaches.

This report will analyse:

• S&P500 earnings grow than destimates for Q3
• Sectoral earnings growth rates and net profit margins
• Sector-specific monthly performance for US and European equities
• Insights from underlying rotation in November

Download the report