Economic Snapshot – November 2025 Update

This article was prepared by Michael Furey, Principal of Delta Research & Advisory, on behalf of HPartners Group.

NOVEMBER 2025 IN SUMMARY

• A volatile start to the month for risky assets initially looked like the start of a correction as “bubble” talk amongst Artificial Intelligence (AI) stocks seemed to be the topic du jour. By the end of the month the only assets that appeared to be lower were Australian assets and in particular, Australian Shares and Australian REITs.

• Australia’s Reserve Bank kept its cash rates at 3.6% as inflation increased and the headline inflation is now up to an uncomfortable 3.8%. Markets have adjusted accordingly and whilst last month we were saying the next move is down, at the time of writing it appears the next move appears to be up and markets currently price the cash rate at 3.85% by the end of next year… so maybe not much movement until the inflation signal strengthens.

• Whilst USA has above-target inflation too, its cash rate appears to be on a downward trajectory, but it is to support the non-AI part of the economy that has generally been hit hard by the Tariff regime. The easy solution in the USA is to remove the tariffs but this appears to be a tool the US administration are eager to exploit but unfortunately at the cost of the economy.

• Our core investment message remains and is to maintain diversification, focus on the long term, and regularly rebalance. Major risks continue to lie with expensive sharemarkets (irrespective of artificial intelligence confidence and the prospect of illegal tariffs), including large companies of the USA, and we continue to favour quality (i.e. good profitability) and value (i.e. “cheap”) styles for long term investments in shares. Quality bonds are preferred as higher yielding below-investment grade bonds provide a historically low premium.
  

A poor returning month for Australian assets

Source: Morningstar

WHAT HAPPENED LAST MONTH?

Markets & Economy

• Sharemarkets had a month of above-average volatility due to a couple of widely reported factors:

  • There are increasingly more questions about the ongoing viability of Artificial Intelligence business models, and combined with their high valuations, associated stocks were initially sold off in November around 5-6% before rallying back in the latter part of the month.

  • Inflation across several developed nations (including Australia, UK, and USA) were a little higher than desired (above 3%), meaning cash rates were less likely to decline hence negatively impacting valuations.

• All major central banks kept their cash rates unchanged and coinciding higher inflation resulted meant bond yields generally increased, although the USA ended the month relatively unchanged as talk of a rate reduction came to the fore. The USA economy Is generally viewed as generally being help up by the strength of Artificial Intelligence capital expenditure with the remainder in various levels of weakness.

• This sharemarket volatility seemed to provide greater impetus to invest in gold as it is widely seen as a volatility hedge (and sometimes a hedge to everything, which it clearly is not), as well as a sell-off in many cryptocurrencies, which many have perceived is not correlated to the sharemarket despite plenty of recent evidence to the contrary.

• Overall, global economic conditions continue to appear mixed without obvious direction. Australian markets performed poorly due to higher inflation and general sharemarket weakness.  The Artificial Intelligence boom continues to have similarities to the sharemarket of the 1990s but with differences that includes the strong profitability of the Magnificent 7 (Nvidia, Google, et al.).

Outlook

• Artificial Intelligence continues its boom, and valuations are nowhere near attractive despite the sell-off early November. Other risky assets like High Yield continues to be tight providing a poor risk-adjusted return compared to cash and bonds, but maybe a reasonable expected return compared to Global shares.

• Whilst USA sharemarket valuations are near record highs for this century, other markets, including Australia appear fully valued, although Europe, Japan and Emerging Markets appear more appealing and are our preferred overweights in the context of Global Shares.

• Whilst US employment data has shown weakness, inflation is higher than desired, artificial Intelligence capital expenditure continues as the growth engine for now but there are question marks over the sustainability of current business models.

• Whist inflation in Australia reduced to 2.1% in the June quarter, the September quarter’s result was a headline 3.2% and October’s a very high 3.8%. Current pricing suggests the Reserve Bank of Australia’s next  move will be a 25bps increase although this is unlikely to occur until 2026. Mixed economic outcomes create uncertainty around the direction of cash rates in USA and Australia so steadiness is favoured.

• Overall, the general portfolio preferences are unchanged and centres on diversification. Volatile markets are likely to continue, and diversification continues to be essential in this environment, whether shares, bonds, real assets, as well as across regions and broader asset class levels. Over the long-term, we believe valuation matters and this continues to be another central theme for investment today.

   

Major Market Indicators

Source: Morningstar, Trading Economics, Reserve Bank of Australia

Source: Delta Research and Advisory, MSCI