November 2025 index market overview: equities face headwinds despite rebounds

US equities: a post-shutdown recovery in question    

US equity indexes, including the S&P500 and Nasdaq100, initially shrugged off the October government shutdown to hit fresh all-time highs by month-end, driven by robust earnings. However, early November saw a swoon as investors refocused on a less-than rosy macroeconomic and policy outlook.    

• Recent rebound and technicals: Stocks have partially recovered following an agreement to end the longest-in-history, 43-day federal government shutdown. Technically, the S&P500 needs to reclaim its October 29th high of 6,920 to signal a continuation of the recovery.    
• Valuation and concentration risk: The S&P500 is currently trading at an elevated 22.8x its 12-month forward IBES earnings. Compounding this risk is the increasing concentration of the US indexes. While the S&P500 is up 14.5% Year-over-Year (YoY), its equally-weighted index is up only 3.6% YoY, highlighting concentration    risk.     
• Key macro headwinds: The market faces multiple concerns, including high economic policy uncertainty (which looks set to remain elevated), fiscal challenges    (with debt-to-GDP continuing to climb), and trade issues. 

The generative-AI narrative under scrutiny 

The generative-AI narrative, which has been a primary driver of the K-shaped stock market rally since October 2022, is now being openly challenged by investors.    

• Concerns over funding and depreciation: Investor concern centers on the use of off-balance sheet financing vehicles and the accounting treatment of depreciation    on IT equipment, which has the potential to flatter earnings.    
• The Burry estimate: US investor Michael Burry commented that hyperscalers may be understating depreciation, estimating an understatement of $176 billion between 2026 and 2028. A failure to account for depreciation appropriately creates the risk of write-downs and a "violent re-appraisal of prices".    
• Technology slowdown: There are also concerns that advances in generative-AI models may be slowing, encountering more frequent issues with "hallucinations"— the tendency to present misinformation as fact.   

FTSE100 strength & High Street banks   

Despite significant headwinds, the FTSE100 index continues to climb and appears set to breach the 10,000 psychological level.    

• Strong performance: The FTSE100 has yielded a total return of 26.7% YoY, rising 23.4% with a dividend yield of 3.3%.    
• Key support: This outperformance is supported by strong showings from High Street banks, defense industrials, and non-energy resources companies.    
• Bank re-rating: High Street banks, whose performance over the past year has    been strong (e.g., Standard Chartered up 74.7% YoY ), appear to have relaxed valuations. The re-rating of High Street banks alone is projected to lift the overall FTSE100 index by around 6.4%.    
• Valuation: The FTSE100's 12-month forward P/E ratio is 13.1x, slightly below its    post-millennium average (13.3x). Assuming its P/E rises to its post-GFC peak (16x), the index could climb to 11,800 (+19.5%), suggesting valuation is not a significant constraint.   

DAX40 stalls amid optimistic expectations    

The DAX40 index has essentially stalled since mid-May, trading in a broad range, and exhibiting weakness towards its 200-day moving average.  

• Concentration and vulnerability: The DAX40 is vulnerable due to increasing concentration among a handful of large-cap firms and a high negative correlation with the S&P500 VIX Index.    
• Stretched valuations: Earnings growth expectations are elevated at 11.7% YoY. Assuming this growth, the forward P/E ratio is 14.6x, well above its long-run    average of 12.3x.    
• Improbable scenario: Regression analysis suggests that an 11.7% EPS expansion is consistent with goods exports expanding 20.5% YoY, which seems improbable. With earnings expectations optimistic and valuation stretched, return expectations for the DAX40 appear low.   

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