Month-end finds global markets in a familiar but fragile place. The November rally has left major indices hovering near the upper end of their ranges, volatility suppressed, and positioning skewed toward a soft-landing narrative that now feels well owned. The question heading into December isn’t whether the tape can grind higher — it’s how much good news is already priced in.
Growth data through November continued to support the “slowing, not stalling” story. Manufacturing PMIs are still mixed but off their lows, services activity is cooling from elevated levels rather than rolling over, and labor markets show early signs of softening without a sharp spike in unemployment claims.
Inflation has drifted lower, but the progress is uneven. Core measures are now decisively below their peaks, yet still above central-bank comfort zones. That keeps policy in a “higher-for-longer, but data dependent” posture rather than pivoting toward aggressive easing.
Net result: the macro data justifies current levels, but doesn’t obviously argue for a new leg of multiple expansion on its own.
Compared with the first half of the month, the key shift has been in how the market trades familiar headlines, not in the headlines themselves. Hot data no longer sparks a broad risk-off move; it triggers rotation. Soft data doesn’t crash indices; it reshuffles leadership.
The “everything rallies” phase of the year is behind us. In its place is a more selective tape where earnings quality, balance-sheet strength, and valuation discipline matter again. That’s classic late-cycle behavior.
Systematic and discretionary positioning has eased from the extremes seen after the October–early November squeeze, but it is still tilted long risk. CTAs are moderately exposed to equities, dealers are close to neutral, and hedge funds have rotated out of the highest-beta names into steadier cash-flow stories.
There is no sign of forced selling, but there is also less dry powder than there was three months ago. Incremental buying now needs fresh catalysts — cleaner disinflation, upside growth surprises, or a genuine shift in the policy trajectory.
Leadership continues to broaden beyond mega-cap tech, but not in a straight line. Industrials, financials, and select energy names have quietly built relative strength, while software, speculative growth and unprofitable small-caps remain volatile around earnings and data.
Factor-wise, investors are rewarding quality and balance sheets more than pure growth. Companies with pricing power, visible demand, and conservative leverage are being used as core holdings, while high-duration stories are treated as trading vehicles rather than destinations.
Three risks dominate the month-ahead discussion:
1. Data surprises in either direction. A sharp re-acceleration in inflation would challenge the soft-landing narrative and push yields higher. Conversely, a sudden downshift in employment or spending would revive the hard-landing debate. Both scenarios argue for higher volatility from today’s low base.
2. Policy communication risk. Central-bank meetings and speeches in December will matter less for the immediate policy decision and more for the path implied for 2026. Any pushback against market-implied cuts could reprice the front end of the curve and spill into equity valuations.
3. Liquidity and year-end flows. As December progresses, liquidity naturally thins and flows become more technical: tax-loss selling, window dressing, and risk-parity rebalancing can all exaggerate moves that would be modest in mid-year conditions.
November ends with markets priced for a gentle landing and a contained inflation path. That scenario is still plausible — but no longer contrarian. For the next few weeks, the risk/reward skew is less about chasing highs and more about managing the gap between expectations and reality.
From here, the tape can still grind higher if data cooperate and policy remains predictable. But the bar for upside surprise is high, and the tolerance for disappointment is shrinking. December is likely to be driven less by new narratives and more by how existing ones survive real-volume trading and thinner year-end liquidity.