F.N.B. Wealth Management Fast Five

1. What happened in markets during November?

November was more volatile than previous months as many of the U.S. equity indices were flat to negative for most of the month before moving higher to close out the month. The S&P 500 ended +0.25% month-over-month (m/m) and the Dow Jones Industrial Average was +0.48% m/m, but the tech-heavy Nasdaq couldn’t get out of the red at -1.45% m/m. Small companies, however, led the gains in the market with the Russell Small Cap Index up +1.25% m/m. International markets were mixed, with international developed markets increasing (MSCI EAFE Index +0.65% m/m) while emerging markets pulled back during the month (MSCI Emerging Markets Index -2.38% m/m).

Investors did buy bonds as the 2-year Treasury yield dropped from 3.60% at the end of October to 3.49% and the 10-year yield was lower by .07% to 4.01%.

Gold was up another +5.5% for the month while crude oil was down -3.82%.

Despite the increased volatility in November, markets closed out the month showing durability.

2. The government shutdown ended in November. Were there any economic or market impacts?

The longest U.S. government shutdown in history, at 43 days, finally came to an end on November 12. However, the U.S. economy isn’t out of the woods just yet. Looking at the shutdown itself, the total impact to economic activity is likely to be around $100 billion. This means fourth quarter GDP growth could be reduced by 1.3%. Of course, with the government reopening, some of this activity could be recaptured in the first quarter of 2026. That is why we believe the shutdown may add to concerns about the strength of the U.S. economy but will likely prove instead to just be a soft patch as more data becomes readily available again. Because the delayed release of data due to the shutdown is also a challenge for policymakers like the Federal Reserve, it may take a full quarter or more to get a better picture of key datapoints such as U.S. unemployment. This could have a material impact on monetary policy and Federal Reserve cuts, but the U.S. economy is likely to reaccelerate during the first half of 2026.

3. Is there still an economic difference between how individuals feel versus what they are doing?

Yes, as we discussed last month, this year has highlighted the juxtaposition between “soft data” (how people feel) and the “hard data” (what they do). The disconnect seemed to get even wider in November as the Conference Board’s Consumer Confidence Index fell to 88.7, the biggest drop in seven months (-6.8 points). Similarly, the University of Michigan Consumer Sentiment Survey dropped to 51, which is one of the lowest levels on record. The current conditions portion of the survey fell 7.5 points to an all-time low of 51.1, with respondents revealing the most negative perspectives on their personal financial situations since 2009. But at the same time, the delayed release of the September Retail Sales report (“hard data”) showed increases in eight of the 13 categories. Overall, sales increased +0.2% month-over-month in September, and the only services category in the report, restaurants and bars, increased +0.7%. Furthermore, this year’s Black Friday online sales increased +9.1% to a new record of $11.8 billion as online shopping carts filled at a pace of $12.5 million per minute between 10:00 AM and 2:00 PM according to Black Friday Statistics.

4. Have the expectations for what the Federal Reserve might do at its December meeting changed?

Yes, by the end of trading on Friday, November 28, market expectations of a December rate cut had reached 83% after falling to as low as 29% the previous week. The change in sentiment was largely driven by the delayed economic reports from September and October that were finally released in November. One significant report was the inflation-related Producer Price Index (PPI) for September. On a headline basis, PPI increased +0.3% m/m and +2.7% year-over-year (y/y), while Core PPI (ex-food and energy) increased +0.1% m/m and +2.6% y/y (the smallest increase since July of 2024). Keeping in mind that these were September numbers, the market’s view is that producer-related inflation is moderating and that should give the Federal Reserve room to make a cut at their December meeting. This is a change from market sentiment earlier in the month.

5. Is there any updated U.S. employment data?

The September nonfarm payrolls report that was delayed due to the government shutdown was released in November. The report showed that the U.S. economy added 119,000 jobs (the most in five months), an amount significantly higher than August’s 22,000 jobs added. Despite the gains, however, the unemployment rate moved up to 4.4%, which is the highest level in almost 4 years. Of course, this information is from September and may not reflect the current state of the labor market. We recognize the employment picture has softened considerably as some high-profile layoffs occurred at the same time as the government shutdown and that is why we are focused on weekly initial unemployment claims (reported by the states every week) staying consistently below 275,000. Going above that could increase the probability of recession. The four-week average for November was 223,750, but continuing unemployment claims did move higher during the month, which suggests the labor market continues to be defined in aggregate as one where employers are not hiring but also not shedding labor in droves.

Charts of the Month

U.S. Spending Includes Increasing Use of Credit:

U.S. consumer credit climbed $13.1 billion in September due to an $11.4 billion increase in non-revolving credit. This is more than likely from a pick-up in auto sales during the month. Revolving credit such as credit cards increased by $1.6 billion during the month. This by itself isn’t overly concerning, however, it comes at a time when we also learned that auto loan delinquencies (more than 60 days past due) for subprime borrowers have increased to 6.65%, the highest level going back to 1994. Furthermore, subprime borrowers now make up 14.4% of consumers which is the highest level since 2019. We will continue to watch consumer credit levels for signs of stress.

U.S. Consumer Credit

Small Businesses Feel Less Optimistic:

The NFIB Small Business Optimism Survey declined .6% to 98.2 in October. Despite the decline, the survey was mostly mixed, with short-term optimism moving lower while other metrics like credit conditions, the uncertainty measures and supply-chain issues improving. The concerns of business owners continue to be quality of labor (27%), taxes (16%), inflation (12%), poor sales (10%), cost of labor (8%), and government requirements (7%). Even with the recent declines, however, small businesses still feel better than they did in 2022, 2023 and 2024.

NFIB Small Business Optimism