Reflections of the CIO...

November reminded us again that markets rarely move in straight lines. The month opened with a sharp bout of volatility, as risk assets, particularly equities, fell sharply. However, they did not stay down for long. A rally in the last week of the month brought markets back to roughly where they started, with the S&P 500 ending November at 6,849 compared with 6,840 at the end of October, after swinging nearly 5% from high to low in between.[1]

This turbulence was driven by a combination of factors: profit-taking after a strong year-to-date rally, and renewed concerns voiced by Wall Street CEOs and others concerning stretched market valuations.[2] There was also some debate over whether the Federal Reserve would cut interest rates in December as anticipated, a debate which eventually fizzled out in light of dovish comments from governors, catalysing the last week rebound in sentiment and stock indices.[3]

One notable theme which was mentioned in last month’s Reflections of the CIO and continued in November, was the growing differentiation in share price performance between the large technology companies. Those companies perceived to have disciplined strategies for their extremely large Artificial Intelligence (AI) spending programmes, such as Alphabet/Google, continued to outperform their peers, signalling the return of investment fundamentals to a sector which hitherto had been characterised by momentum, hype and lofty valuations.[4] Investors are increasingly scrutinising whether the current massive AI-related capital expenditure will translate into sustainable returns, and this will undoubtedly be a key theme throughout the ‘delivery year’ of 2026.[5]

Elsewhere, profit-taking extended to more speculative corners of the market, such as Bitcoin, which is now down c. 33% over eight weeks, neatly illustrating the clear out in frothy asset valuations which accelerated during November.[6] Gold was volatile, trading in c. 6% range before finishing the month strongly.

Closer to home, the UK 2025 Autumn Statement offered little to cheer. While a tax-raising budget calmed gilt and currency markets, it failed to address longer term growth challenges, nor incentivise private sector investment. This leaves the UK macro story somewhat underwhelming when compared to international peers, albeit it would also be fair to say that a large part of this story is already reflected in the valuations of UK assets. Our medium term approach to investing any further in the UK will likely remain tactical, reacting to individual opportunities as they arise, rather than a broad based approach, which would require some combination of a more exciting macro environment and even lower valuations.Looking ahead to 2026, the outlook remains constructive but not without its challenges. Solid nominal economic growth should underpin corporate earnings, especially as governments across the US, UK, Europe, and Japan continue to front-load fiscal spending. This fiscal impulse, combined with anticipated interest rate cuts in the US and the UK, should keep liquidity plentiful and provide enough support to markets to continue their progress. The outlook remains ‘glass half full’ rather than ‘half empty’.

There are plenty of near-term risks to navigate too, spanning everything from the dominance of the AI theme in equity indices, to emerging vulnerabilities in private assets. Correlations between assets are also tricky to manage currently, given the often whimsical policy making of governments and the ability of market sentiment to flip flop with regularity. In addition, we would also expect returns to moderate from the pace of the last few years, given the generally higher starting points for most assets. Despite these challenges, we think there are still enough reasonable opportunities available to construct diversified portfolios across risk bands, and as such, approach the year ahead with confidence.

The Saltus Asset Management Team, December 2025