Tug-of-War at the Fed

The longest government shutdown in history ended on Nov. 12, but for markets, things were just getting started.

First, we learned we’ll never get unemployment or inflation reports for October, but September labor data was finally released — and only added to the uncertainty: 119,000 jobs were added versus expectations for just 52,000, but the unemployment rate rose from 4.3% to 4.4%.

Meanwhile, opposing views among Federal Reserve officials continued to stoke debate over whether they will lower benchmark interest rates again at their December meeting. Although the discord was already evident at their October meeting — when there were not only two dissenting votes, but they favored going in opposite directions — the lack of consensus was reinforced by the Nov. 19 release of the minutes from that meeting.

As the month progressed, Fed officials continued litigating their opposing stances in public, fueling wildly oscillating bets on a December rate cut. And as is typical, the interest rate volatility didn’t occur in a vacuum – it sucked in other assets with it.

Futures-implied December 2025 Rate Cut Odds

The Great Rotation

If you had to choose one word to describe November markets, “calm” would decidedly not be it.

The month as a whole was deceptively flat for stocks: the S&P 500 was down over 4% as of Nov. 20 but then bounced back to finish the month barely in the green.

And that’s not to mention the significant rotation that occurred beneath the surface: the AI trade that powered portfolios all year ended the month down 8%, while capital rotated into the Health Care sector, boosting its November return to 9% (its best month versus the broader market since 2001).

Relative Monthly Returns for Health Care vs. the S&P 500

Other asset classes saw an even starker divergence. Cryptocurrency markets suffered a severe drawdown, decoupling entirely from other “risk-on” assets. Conversely, gold staged a powerful rebound after its October swoon, surging back near all-time highs. Commodities such as copper and natural gas had a good month as well.

If nothing else, the rotation into typically defensive areas of the market suggests underlying skepticism about the resilience of stocks, even as indices remain near their highs.

Market Recap

Asset Returns

November 2025 Sector Total Returns

Macro

•  President Trump signed into law a short-term funding agreement to end the longest government shutdown in history.

•  The September Employment Situation report was finally released on Nov. 20, showing 119k jobs added and a 4.4% unemployment rate, both higher than consensus expectations.

•  The Bureau of Labor Statistics officially announced that the October unemployment and inflation data would be permanently skipped due to the lack of data collection during the shutdown.

•  Oil prices finished the month below $60 a barrel, the third such month since early 2021.

•  The Japanese Yen depreciated sharply against the U.S. dollar for the second straight month, bringing the currency to its weakest level since January.

Equities

•  With 97% of the S&P 500 having reported results, the EPS growth rate stands at 15%, the fastest since the fourth quarter of 2021.

•  Health Care outpaced the broader market by 9.0 percentage points, the biggest return differential since 2001.

•  Value stocks beat growth stocks by 4.3 percentage points, the most since March.

•  AI stocks declined 8.0 percentage points in November, their second worst performance since Dec 2022.

•  Though it closed near its lows of the month, stock market volatility, as measured by the VIX Index, peaked at 26.4 on Nov. 20, its highest level since April.

Fixed Income

•  Interest rate cut expectations oscillated wildly as Fed officials made public comments on the economic environment, falling as low as 29% on Nov. 19 and as high as fully priced by Nov. 30.

•  Corporate bond spreads widened then narrowed as rate cut expectations eased and intensified, respectively.

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It’s amazing how the same thing can feel totally different depending on your perspective.

Take housing: How can today’s market be so rewarding for those who own a home yet so punishing for those who don’t?

The short answer: The pandemic. Property values that shot up after COVID are still high, but mortgage rates that fell to record lows aren’t still low. That means that most Americans who bought or refinanced at ~3% rates in 2020 or 2021 have not only seen a surge in their property values but have built equity in their homes more quickly than higher rates allow. Meanwhile, many who don’t have a house to sell can’t afford to buy otherwise.

As Jessica Lautz, the deputy chief economist at the National Association of Realtors® (NAR) recently put it, the housing market has become “a tale of two cities.” Property prices are 54% higher than at the start of the pandemic, so existing homeowners are making large down payments and all-cash offers while would-be buyers struggle just to break into the market, she said.

Data from NAR’s latest annual survey bears this out: Repeat buyers — older than they’ve ever been at a median age of 62 — are benefiting from the surge in home equity, with 30% paying for their next house entirely in cash this year. (That’s just shy of last year’s record high.)

At the same time, only 21% of buyers were buying for the first time this year, the smallest share ever (and down from at least 30% in the years prior to the pandemic and 40%+ before the Great Recession of 2007.) In fact, compared with 2019, roughly 1.8 million more renting households can’t afford a typically-priced home, according to a separate analysis by CBRE Research.

Remember, home equity is how much of a home you own, so it grows not only when the home becomes more valuable, but as you pay off your mortgage. And since over half of mortgaged homeowners in the U.S. are paying a rate below 4%, a smaller portion of their monthly payment goes toward interest, so they can build equity more quickly. Collectively, home equity in the U.S. is up 72% to $35.8 trillion over the past five years, according to Federal Reserve data.

In short, the options have expanded for property owners but shrunk for renters, making housing a classic example of what some are calling a “K-shaped” economy. On the upper arm of the “K” are higher-earning households who are more apt to own real estate or stocks that have surged in value during the AI market rally. On the lower arm are people whose purchasing power is being eroded by inflation and higher interest rates.

So what?

Today’s real estate market favors those who already have a seat at the table.

If you own a home, your equity is your superpower. You can use it to continue to grow your wealth, or if you decide to move, hopefully reduce (or maybe even avoid) a new mortgage. You can also borrow money against your home equity to pay for renovations or other expenses.

And if you don’t own a home, keep in mind that the traditional path to homeownership is shifting. The median age of this year’s first-time buyers reached a new record high of 40, which means many buyers may have a shorter timeline for building equity in a starter home.

On the bright side, once you’re a homeowner, you’ll have a new appreciation for rising property prices. And the market is slowly rebalancing: Buyers are starting to have more bargaining power on price, especially in the Southeast. Plus mortgage rates, while still over 6%, are lower than they’ve been most of the past year.

If you want to jump in sooner rather than later, consider tradeoffs like buying a smaller property, getting a fixer-upper, or moving to a less competitively-priced area. You may also want to explore asking relatives for help with the down payment.

Related Reading

Why Waiting for a Housing Crash Could Be Costing You Money (Investopedia)

A Potential ‘Second Spring’ for Homebuyers (SoFi)

I’m a Real Estate Agent: 5 Housing Market Trends To Prepare for in 2026 (GoBankingRates)

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