After a brisk rally in October, November saw muted returns across most asset classes. Policy participants have expressed sharply divergent views on future interest rate decisions, leaving investors cautiously optimistic, and leadership rotated toward real assets and commodities, while emerging markets lagged.

Fixed income markets reflected shifting market expectations for Federal Reserve policy during the month. U.S. equity markets were generally positive in the month, with small cap outpacing large cap, and diversifying areas of the market outpaced broader equities as inflation ticked up slightly.

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The Federal Reserve continued to cut the Fed Funds rate in October, further reducing the target by 0.25%. U.S. equity markets were generally positive in the month, with large cap equities besting small cap, and U.S. equity REITs declined, underperforming most asset classes.

While the economy appears steady, cracks are emerging in the labor market. The Fed cut rates by 25 basis points in September, lowering the target range to 4.00–4.25% after nearly a year-long pause. Global markets outside the U.S. have surged this year, with standout performers such as China and Korea delivering returns of more than 50% year-to-date, and small caps stole the spotlight in the third quarter, beating large caps by more than 4% as measured by the Russell 2000 versus the S&P 500.

The FOMC reduced the Fed Funds Rate by 25 basis points in September, the first cut since December 2024. U.S. equities moved higher in the month, and REITs were modestly positive in September but trailed the broader equity market.

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Declining interest rates were a tailwind for fixed income assets during August. U.S. equity markets rallied and U.S. equity REITs posted favorable results in August.

It was a negative month for Core Bonds. Markets have come a long way since “Liberation Day” as some of the fog around trade policy lifted with notable agreements being made with Europe and Japan during July, and rising interest rates put negative pressure on REITs.

Tariffs and trade policy jump started the quarter, but fiscal policy came to the forefront as the Trump administration announced the “Big Beautiful Bill.” The Federal Reserve held its policy rate steady during the quarter as it balances inflation and labor market data signals. The U.S. dollar is still relatively strong, and oil is priced similarly to times when inflation is near 2.5 percent.