Risk Assets Rally Into Month-End
Friday, U.S. stocks extended a Thanksgiving week rally, with the S&P 500 up 0.54%, the Dow up 0.61%, and the Nasdaq gaining 0.65%, even as the tech-heavy index locked in its first monthly loss since March. A rotation out of the most expensive AI names earlier in November left the Nasdaq down about 2% for the month, while the S&P 500 and Dow eked out small gains, each logging a seventh straight winning month.
Traders are leaning into a soft-landing narrative and pricing a high probability that the Federal Reserve will deliver a third consecutive quarter-point rate cut in December, after officials such as New York Fed President John Williams signaled room for a "further adjustment" lower in rates. That backdrop helped small caps in the Russell 2000 outperform in November and pushed a dozen S&P 500 components, from Walmart to Broadcom, to fresh all-time highs as investors broadened beyond the mega-cap AI trade.
Market functioning briefly came into focus when a cooling failure at a CME Group data center froze futures in equities, Treasurys, FX, and commodities overnight. The outage left investors watching ETFs like SPY and QQQ as real-time proxies until futures trading resumed. Strategists expect only short-lived volatility from the incident but highlight it as a reminder that physical infrastructure risks can abruptly disrupt global price discovery.
In commodities, spot silver surged 90% year to date and hit a record high, far outpacing an already-strong move in gold as some investors sought hard-asset hedges amid shifting monetary policy expectations. Airline stocks also outperformed into the holiday, helped by the Federal Aviation Administration’s projection of the busiest Thanksgiving travel in 15 years and a double-digit slide in jet fuel prices over the past week.
Canada’s Growth Powered By Defense
Friday, Statistics Canada reported that the economy grew at an annualized 2.6% in the third quarter, surprising to the upside and narrowly avoiding a technical recession after a revised 1.8% annualized contraction in Q2. The rebound was heavily driven by an 82% surge in government spending on weapons systems and stronger crude oil exports, reflecting Ottawa’s June pledge with NATO partners to lift defense outlays to 5% of GDP by 2035.
Under the surface, domestic demand looked far weaker. Business investment was flat, household spending slipped as auto purchases fell, and consumers redirected more of their budgets toward rent and financial services rather than discretionary goods. Monthly GDP in September rose just 0.2%, and some of the data may be revised more than usual early next year because of gaps caused by a U.S. government shutdown.
Economists are split on what the numbers mean for 2026. Bank of Montreal’s Douglas Porter said the upside surprise "should quash recession chatter for now" and expects growth of about 1.4% next year, slightly above the federal budget’s 1.2% assumption. The Canadian Chamber of Commerce’s Andrew DiCapua was more downbeat, describing the economy as "sickly" and warning that without a revival in private consumption and investment, growth will struggle to gain momentum.
For the Bank of Canada, the mixed composition of growth reinforces expectations it will hold rates steady at its next meeting. Stronger headline GDP reduces pressure for near-term easing, but soft household and business activity will keep policymakers alert to signs that high borrowing costs are biting too hard. Markets will focus on upcoming labor and inflation data to gauge whether this quarter’s defense-led boost is a one-off or the start of a more durable expansion.
ECB Signals Long Pause Ahead
On Thursday, minutes from the European Central Bank’s October 29–30 meeting showed policymakers increasingly confident that interest rates are "in a good place" after a year of cuts that halved the deposit rate to 2%. The Governing Council left rates unchanged at that meeting, judging policy to be sufficiently restrictive with eurozone growth still positive, if modest, and inflation now hovering near the ECB’s 2% target.
The accounts indicated a clear preference to "wait for more information" rather than pre-commit to further easing, with some members arguing the rate-cutting cycle may already be complete if the benign outlook holds. Others pushed back, insisting the ECB must preserve "full optionality" in case inflation undershoots target for too long, particularly as lower energy prices drive down headline readings in 2026.
Recent data have reinforced bets that the ECB will stay on hold for several months, with markets now assigning only about a one-in-three probability to another cut next year. The central bank will publish its first 2028 projections on December 18, but officials have already downplayed the weight of such long-range forecasts, stressing that future decisions will hinge on realized inflation and growth rather than distant models.
For investors and borrowers, the message is stability rather than imminent relief. Short-term funding costs in the euro area are likely to remain near current levels well into 2026, which supports bank margins and the euro’s yield appeal but limits how much additional stimulus the ECB can provide if growth slows sharply. Any persistent slide of inflation below target could eventually force a rethink, making upcoming price data and wage settlements critical to the rate path.
Crypto’s Pain Despite Mainstream Wins
Heading into late November, the crypto sector is absorbing a sharp reversal after a year that seemingly delivered everything the industry wanted: spot ETFs, friendlier legislation, and even vocal support from the White House and some corporate treasuries. Global crypto market cap peaked near $4.3 trillion in early October before a flash crash erased about $1 trillion, leaving capitalization near $3.2 trillion, roughly 23% below its high and 16% under January levels.
Flagship tokens such as Bitcoin, Ethereum, and Solana have all dropped by double digits in recent months while U.S. stock indexes remain solidly positive for the year. Bitcoin trades around $90,000, more than 25% off its 2025 high and about a third below some intrayear peaks, while altcoins have fared worse. The drawdown has punished listed crypto proxies like Strategy, formerly MicroStrategy, whose stock is down more than 60% from its high and has been excluded from the S&P 500 as index providers reassess volatility and concentration risks.
The slump comes despite, and in some critics’ eyes because of, greater institutionalization. Actor and author Ben McKenzie, a prominent skeptic, argued in a recent CNN interview that crypto’s extreme leverage and lack of underlying cash flows make it a "canary in the coal mine" for broader risk sentiment and a "zero-sum game" that amplifies boom-bust cycles. Others warn that heavy corporate Bitcoin buying, notably by firms like Strategy, could exacerbate forced selling if those companies come under pressure.
For investors, the debate now centers on whether 2025’s slide is a mid-cycle reset in a longer bull market or the opening act of a deeper "crypto winter." If prices stabilize near current levels, dollar-cost averaging into higher-quality coins like Bitcoin and Ethereum could still pay off over a multiyear horizon. A renewed leg down, by contrast, would likely hit altcoins hardest and test the risk management of institutions that piled in during the ETF and policy euphoria, with knock-on implications for correlated high-beta tech stocks.
Signals To Track In Year-End Markets
- Monitor how quickly CME’s data-center outage fades from markets; any repeat disruptions could trigger higher volatility premiums or renewed focus on exchange infrastructure risk.
- Watch upcoming eurozone inflation prints and the ECB’s December 18 forecasts for signs that price growth will dip meaningfully below 2%, which could revive talk of further cuts despite the current "steady hand" stance.
- Track Canada’s next labor and retail sales releases to see if Q3’s defense- and export-driven GDP bounce broadens into stronger consumer and business demand or proves to be a one-off.
- Follow silver and gold price action after silver’s all-time high and 90% year-to-date gain; a sustained push higher could signal a broader shift toward hard-asset hedges as rate trajectories evolve.
- In crypto, keep an eye on Bitcoin’s ability to hold key technical levels around recent lows and on flows into spot ETFs, which will show whether mainstream investors are using the drawdown to add or to head for the exits.
