Market Overview
In a turbulent month, global equity markets slipped in November, as the monthslong technology-driven rally sputtered, and risk appetites waxed and waned amid uncertainty about the near-term outlook for U.S. interest rates.
The month was marked by signs that the investor enthusiasm for artificial intelligence (AI) was beginning to waver amid worries that the stocks that had soared due to the AI boom had become overvalued. Anxiety was also growing that the lavish spending by technology companies on semiconductors and data centres, which has become increasingly reliant on issuing a massive amount of debt, may not lead to as much profit as hoped and could increase the risk of an AI bubble. Notably, the top 10 detractors to the MSCI All Country World Index’s performance in November, which reduced the index’s overall return by 1.5%, were all stocks of companies leveraged to AI.
Uncertainty about the Federal Reserve (Fed)’s interest rate policy path had an outsized influence on the behaviour of global stock markets. After delivering two 25-basis point (bp) rate cuts at its policy meetings in September and October, investors entered the month confident that the Fed would do so again in December despite warnings from the U.S. central bank that further reductions in borrowing costs were not a “foregone conclusion.” Investor confidence was shaken, however, after the release of the written record of the Fed’s October policy meeting suggested that a sizable bloc of monetary policymakers—and potentially a narrow majority—were not completely onboard with a rate cut in December, and a handful of speeches delivered by Fed officials during November revealed sharp disagreement over whether a weakening labour market or stubbornly high inflation posed a greater threat to the health of the U.S. economy. Comments by a top Fed official hinting that the cooling labour market may warrant a rate cut in the near term raised hopes that such an action was back on track for December, sparking a late-month strong rally that recovered a significant portion of the losses markets suffered earlier. By the end of November, Fed-funds futures traders were pricing in a nearly 87% chance that the Fed would lower rates next month, according to the CME’s FedWatch tool. Reflecting this renewed confidence, the yield on the benchmark 10-year U.S. Treasury note fell 6 bps in November, ending the month at 4.02%.
Investors were also monitoring other major central banks during the month. In Europe, the European Central Bank (ECB) signaled that the trajectory of the eurozone economy would need to change materially before it would consider lowering interest rates again. The ECB has held interest rates steady for three consecutive policy meetings as the common currency bloc’s economy has shown signs of improvement and inflation has hovered near the ECB’s 2% target.
In the U.K., the Bank of England left interest rates unchanged but signaled that rate cuts were on the horizon, as policymakers attempted to balance weak economic growth, persistent inflationary pressure, and a softening labour market. Elsewhere on the Continent, central banks in Sweden and Norway held interest rates steady, with both stating that rate reductions were not likely in the near term, while Switzerland’s central bank hinted that it will follow suit at its next policy meeting in December. In November, the yield on the 10-year German Bund, Europe’s principal safe-haven asset, rose 6 bps, ending the month at 2.69%.
Meanwhile, in Japan, expectations were growing that the Bank of Japan (BOJ) would raise interest rates at its policy meeting in December, as the yen weakened materially and political pressure from the country’s new prime minister to work with the government to reflate the domestic economy and to proceed cautiously in lifting rates abated. Elsewhere in Asia, China’s central bank stated that it would maintain an “appropriately loose” monetary policy, as the country’s economy continued to be hampered by deflationary pressure.
With the new earnings season in full swing, investors were provided with the latest update on how company profits have held up amid a challenging macro environment. In the U.S., 82% of the companies in the S&P 500 Index that reported results topped consensus estimates, outperforming the long-term average of 67%. The third-quarter earnings growth rate is estimated to have increased 13.4% from a year earlier. In Europe, 48% of the companies in the STOXX 600 Index that reported results posted better-than-expected earnings, below the 54% that do so in a typical quarter. The third-quarter earnings growth rate is expected to have increased 3.7% from a year earlier. In Japan, 63% of the companies in the TOPIX that reported results posted positive earnings surprises, surpassing the 53% beat rate over the past four quarters. The third-quarter earnings growth rate is estimated to have increased 35.3% from a year earlier. In Hong Kong, 47% of the companies in the Hang Seng Index that reported results registered better-than-expected earnings, lagging the 57% beat rate over the past four quarters. The third-quarter earnings growth rate is projected to have decreased 6.2% from a year earlier.
Against this backdrop, equity markets in the developed and developing worlds both fell in November, with the former outperforming the latter. In the U.S., the S&P 500 eked out a modest gain and ended the month near the record high set in late October, thanks to growing optimism that the Fed would lower interest rates at its December policy meeting. Across the Atlantic, the pan-European STOXX 600 rose and outperformed the broader global index, as the Continent’s limited exposure to companies leveraged to AI mitigated the impact of the market sell-off of AI stocks. In Japan, the TOPIX outperformed, as growing expectations that the BOJ will soon raise interest rates boosted the stock prices of several index-heavyweight lender stocks. Meanwhile, in China, the Hong Kong-based Hang Seng Index, whose constituents include several prominent Chinese technology companies, fell and lagged the broader global index, as the global sell-off of technology stocks, concerns about weak economic data, and uncertainty about government support weighed on investor sentiment.
Information technology was the worst-performing sector in November, as the fervour for AI cooled amid concerns about overvalued AI stocks and the lavish spending by technology companies to build out AI infrastructure. Health care was the best-performing sector, as the stock prices of several heavyweight drugmakers rose on strong quarterly results and positive news flow.
Outlook
Uncertainty surrounding the economic outlook and key policy measures, particularly in the U.S., continues to sow volatility in markets and interrupted what had previously been, in our opinion, a clearer line of sight towards decelerating inflation and a likelihood of an economic soft-landing. On the other hand, economic activity and employment in the U.S. has proved more resilient than anticipated, in our view, and should be further supported by the beginning of an easing monetary policy cycle by the U.S. Federal Reserve, which began in September.
While markets continue to wrestle with uncertainty, we expect Infrastructure to continue to exhibit critical defensive qualities and remain an invaluable diversification component for investment portfolios given the essential nature and real asset characteristics of the asset class. In contrast to businesses and industries where valuation is underpinned primarily by revenue growth and often highly competitive profit margins, critical infrastructure derives considerable valuation support from its high fixed cost of investment and high visibility, high margin cash flows collected over long periods of time (to recoup the initial capital outlay).
This important combination of characteristics tends to lend itself to superior defensive positioning, in our view, against global trade uncertainty, inflationary pressure, economic recession and market volatility. On the risk side of the ledger, however, we include typically above-average levels of balance sheet leverage and sensitivity to interest rates.
From a sectoral standpoint, we see a number of multi-year critical infrastructure investment trends likely to continue largely undeterred by recent tariff and trade uncertainty. Electrification and the growing demand for power to accommodate the Artificial Intelligence (AI) / Data Centre development surge serves as an example, in our view. Utilities were a key positive contributor to performance during 2024 and have been as well in 2025. We maintain a favourable sector outlook for Utilities and foresee scope for continued upward earnings revision, particularly in the U.S. where the demand for power is materializing at a faster pace. Outside the U.S., while the trend may be lagging and destined to evolve more subtly, we also see opportunity in considerably more compelling valuations.
Outside of the utilities sector, we believe U.S. midstream energy, namely oil & gas storage and transportation, continues to offer a compelling combination of attractive valuation and improved capital allocation discipline. And while increased uncertainty regarding the pace of global economic activity now weighs more heavily on energy prices and the sector earnings outlook generally, the vast majority of the cash flows associated with the portfolio’s midstream holdings are fee-based and enjoy strong support from take-or-pay contracts and spread differentials at key access points.
Elsewhere within the portfolio, we see an abundance of opportunities stemming from large-scale investment in transportation infrastructure, information technology and energy development & security, leading to increased demand for materials, capital goods and industrial equipment.
We believe the portfolio remains well-positioned to take advantage of these opportunities in real asset infrastructure businesses as well as key enablers, including materials, services, and technologies, that will both facilitate and benefit from increased investment in infrastructure.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.
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Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy. Emerging markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The securities markets of emerging markets countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in these countries.
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Published on December 17, 2025.