Investment Update December 2025
- ABP Team
- 2 days ago
- 6 min read
Key Highlights:
The S&P 500 rose 0.13% in November and 16.45% year-to-date, ending the month at 6,849.
Michael Burry’s short-Nvidia recommendation briefly unsettled markets despite strong corporate earnings.
The U.S. government shutdown lasted 43 days, the longest on record, contributing to reduced liquidity.
Approximately $10 trillion of U.S. debt must be rolled over in 2026, making liquidity a central consideration.
Quantitative tightening ended on 1 December, improving liquidity alongside the release of Treasury General Account funds.
Money supply is expected to increase by around 8% in 2026 due to additional bill issuance.
Stress in U.S. regional banks persisted as auto-loan delinquencies rose, while bank reserves were described as “not ample”.
U.S. Treasury yields closed near 4.15% (10-year) and 4.75% (30-year), reflecting fiscal uncertainty.
The Dow Jones gained 0.6% and the Nasdaq added 0.7% on the final trading day of November.
The FTSE 100 fell 3.4% in November to around 9,385, though remains up nearly 19% year-to-date.
UK public debt reached £3 trillion, approximately 94.5% of GDP, underscoring ongoing fiscal pressure.
The 10-year gilt closed the month near 4.44%, easing after the Chancellor’s tax-raising budget.
European equities gained around 1.1% in November, supported by easing inflation trends.
German public debt is rising toward EUR 3 trillion, alongside signs of steady economic growth.
The Nikkei 225 ended near 48,800, while the 10-year JGB yield reached 1.79% and the 30-year near 3.3%.
Chinese equities softened, with the Shanghai Composite down 3.2% and CSI 300 down 4.7% in November.
AB Portfolios recorded a credible year-to-date performance, with no breaches in risk thresholds and a modest increase in risk asset exposure.
Michael Burry, the hedge fund “star manager” best known for The Big Short, launched his research Substack with considerable fanfare in mid-November. His recommendation to short Nvidia seemed unusual, given the company had just reported blockbuster earnings. Nevertheless, the call unsettled U.S. markets momentarily alongside other possibly more relevant factors.
However, November ultimately closed in positive territory for the S&P 500, up 0.13% for the month and a highly respectable 16.45% year-to-date.
Of course, there’s more to the story, and we explore the details in the Investment Update that follows.
The most recent U.S. government shutdown, caused by a dispute over federal funding and health care subsidies, lasted 43 days, making it the longest in history. There are plenty of human implications to the shutdown, but one important market related outcome is the impact on essential liquidity. We know that the provision of liquidity is essential for the stability of risk assets. A general loss of momentum in the provision of liquidity both from the U.S. and from China has been evident during November and this will be rectified. There is approximately $10 trillion debt to be rolled over during 2026, and liquidity is the essential constituent to (relatively) smooth passage.
From 1st December, Quantitative Tightening will end, this should be a net positive to the overall liquidity position. The gradual release of funds from the Treasury General Account, now the government shutdown has ended, will assist too. Additional borrowing through bills is expected to increase the money supply by approximately 8% in 2026. This aligns with our expectations around debt rollover requirements and the extra liquidity needed to fund U.S. budget deficits. A side effect of this scale of monetary expansion is an inflationary impulse – and under a Trump-led Fed, an explicit inflation target is unlikely to be prioritised.
Source: Global Liquidity Index, 22 November 2025
Last month we noted possible stress in regional banks where growing delinquencies in auto-loans (for example) were notably on the rise. U.S. Treasury official Bessent commented that current bank reserves are “not ample”, noting that ample reserves should rise to around $3.2 trillion.
U.S. equities navigated a volatile November with a dramatic late month rebound. After mid-month weakness driven by profit-taking in AI-linked stocks and concerns over stretched valuations, optimism over the undoubted strength of the latest corporate earnings season, and a potential Federal Reserve rate cut in December sparked a strong rally. The S&P 500 ended the month marginally higher at 6,849, while the Dow Jones gained 0.6% and the Nasdaq added 0.7% on the final trading day. Despite turbulence, year-to-date returns remain impressive, underscoring the resilience of U.S. markets.
The table below shows 83% of all companies in the S&P 500 delivered earnings results above expectations.
U.S. bond markets saw Treasury yields edge higher in November, with the 10-year closing near 4.15% and the 30-year at 4.75%, reflecting persistent term premium and fiscal uncertainty despite prior Fed rate cuts. Looking ahead to December, markets anticipate a possible rate cut at the final Federal Reserve meeting of 2025.
UK equities faced a challenging November, with the FTSE 100 retreating about 3.4% to close near 9,385 after hitting record highs in October. The pullback reflected profit-taking and caution ahead of key economic data and Bank of England policy signals. Despite this dip, the index remains up nearly 19% year-to-date, supported by strength in commodities and defensive sectors with earnings derived typically outside the geographical boundaries of the country. UK bond markets were volatile in November as fiscal uncertainty ahead of the Autumn Budget pushed gilt yields higher mid-month, before easing after the Chancellor’s tax-raising budget. The 10-year gilt closed the month near 4.44%, with markets now looking to December for Bank of England signals and further clarity on fiscal discipline. UK public debt has climbed to around £3 trillion, equivalent to roughly 94.5% of GDP, underscoring persistent fiscal pressures despite efforts to stabilise borrowing. Borrowing must be contained, otherwise a higher debt ceiling should be accepted, even higher taxes must be levied, or benefits and entitlements logically should be contained.
Looking ahead to December, although forecasts suggest continued volatility, the longer-term outlook remains constructive, particularly if commodity prices hold firm and sterling can remain stable. We remain disappointed by the economic stewardship of the UK.
European equities posted modest gains in November, with the STOXX 600 advancing around 1.1% as optimism over a potential U.S. Federal Reserve rate cut buoyed global risk sentiment. Most major indices, including the Euro Stoxx 50, DAX, and CAC 40, ended the month in positive territory, supported by easing inflation trends and expectations of gradual European Central Bank policy adjustments. Year-to-date, European markets remain firmly higher, underpinned by strong corporate earnings and fiscal support across the region. We note German debt levels will rise to EUR 3 trillion, a once unthinkable number. However, we also note steady economic growth resuming and a demonstrable willingness to enhance military and infrastructure spending, not simply hiking benefits and entitlements.
Looking ahead to December, historical patterns suggest a “Santa Claus rally” could lift European stocks further. While volatility cannot be ruled out, seasonal strength and improving macro conditions point to a constructive backdrop for European equities as we close out 2025. Any form of peace deal in Ukraine will obviously be beneficial.
Source: Bloomberg, 29 November 2025
Source: IMF, 26 November 2025
Japanese equities experienced a mixed November, with the Nikkei 225 ending near 48,800 after a volatile month marked by profit-taking in technology stocks and geopolitical tensions with China. Despite short-term weakness, the broader TOPIX held above 3,200, supported by optimism around Prime Minister Takaichi’s pro-growth agenda and structural reforms. Year-to-date gains remain strong, reflecting robust corporate governance improvements and fiscal stimulus expectations. On the fixed income side, Japanese Government Bond (JGB) yields surged to multi-decade highs, with the 10-year closing around 1.79% and the 30-year near 3.3%, driven by a ¥21 trillion stimulus package and concerns over fiscal sustainability. While no immediate rate hike is expected, markets are pricing in tighter policy by late 2026. Elevated yields and a steepening curve suggest continued caution for duration exposure, making diversification across equities and inflation-linked assets a prudent strategy.
Meanwhile, Chinese equities ended November on a softer note, with the Shanghai Composite down 3.2% for the month at 3,889 and the CSI 300 off 4.7%, despite strong year-to-date gains of over 15%. Early-month optimism driven by AI and semiconductor stocks faded as renewed U.S.-China trade tensions and lingering property sector weakness weighed on sentiment. On the fixed income side, Chinese government bonds saw modest yield increases, with the 10-year closing near 1.83%, reflecting fiscal stimulus expectations and cautious monetary policy from the PBoC.
Alpha Beta Portfolios have delivered a credible performance this year, with risk thresholds remaining firmly intact and no breaches across the board. We made a modest increase in risk-asset exposure over the past month, anticipating a U.S. rate cut and some form of year-end rally.
As the year draws to a close, we extend our sincere thanks to investors, clients, and readers for their continued support, and we look forward to serving you well in 2026.
Written by the Alpha Beta Partners Investment Team.
All sources Bloomberg unless stated.
