By Craig McAvinue – 5 December, 2025
Stock market bubbles do not grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception
Despite some bumps along the way, US and UK markets finished fairly flat, with Emerging Markets and Japan experiencing some losses
Not too much movement for the month of November for the greenback…
Data from Google Finance
The first two thirds of November saw a well anticipated sell off after what has been a great year for the S&P 500 in terms of overall gains. Lots of hedge funds who were long only on tech took their profits. Though the AI giants who have been the catalyst for these gains continued to benefit from positive outlooks and monies flowed back in on the back of good results and future growth.
Inflation cooling also helped to see a bounceback of over 4% in the last ten days of the month.
Concerns around many other sectors aside from tech do however not paint such a rosy picture. Real Estate, consumer driven businesses and utilities all had weak earnings and as detailed in last month’s report, could indicate that we are actually in a slowing economy despite the market gains.
The Japanese markets were understandably down with profit taking being the major factor. If the Nikkei finishes the year where it is today, we’d be looking at the eleventh best year in its seventy five year history.
In the UK, the FTSE 100 had a flat month with Oil and Banking remaining steady, sectors the larger cap companies are in.
So far in 2025, the S&P has had eight out eleven months positive but more to the point we’ve seen seven positive months in a row. Only five times in the history of the S&P has this landmark been surpassed and only once in the same calendar year.
With the traditional Santa rally meaning that 75% of the time we have a positive December, “on paper” 2025 could be up there in the record books.
Deeper dives though as mentioned before can show that the density of these gains is so high and centred around the AI boom that many other stocks and funds do not have similar positive results.
The world bubble will continue to be talked about when we look at the sheer size and gains in Nvidia , Microsoft, Meta et al. With estimates at around just 11% of the world’ population using AI, there is clearly still some way to go. And with continued growth in earnings, highlighted by Nvidia’s recent announcements, toppy valuations maybe, bubble …unlikely.
For the lovers of volatility, Bitcoin saw seven months of gains taken away in a single month. Is it time to buy here? Regular readers know that I understand (on a personal level too) the FOMO associated but with numbers like we have seen in November, just remember the risk versus reward, position yourself accordingly and understand it’s a bumpy road ahead..
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