Markets retreat as investors reassess valuations

2025-11-21

Paul Eitelman, CFA

Global Chief Investment Strategist

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Key takeaways

Pullback likely reflects shifting sentiment
Nvidia caps strong earnings season
Odds of Fed rate cut fall

Markets cool after strong rally

Global equity markets pulled back this week, ending a recent strong stretch. After setting new highs in late October, investors have turned more cautious, prompting a modest reassessment of valuations. The Nasdaq has declined nearly 8% from its peak, the S&P 500 around 5%, and global equities—measured by the MSCI All Country World Index—have similarly fallen by about 5%. Trading volumes have also started to thin as markets head into the U.S. Thanksgiving holiday period.

We see the retreat in equities as a valuation and sentiment reset, rather than a deterioration in fundamentals. After an exceptional year for equities, modest profit-taking and position adjustments aren’t too surprising as investors take stock of stretched valuations heading into year-end.

U.S. job growth ticked up in September

From a fundamentals perspective, two key developments stood out this week. The first was Nvidia’s third-quarter earnings report, which closed out the U.S. mega-cap earnings season. The AI chipmaker’s results beat expectations and its management provided upbeat guidance for the fourth quarter and beyond. This continued the trend of resilient corporate earnings that have supported equity markets throughout 2025.

The second was the delayed U.S. employment report from September, which wasn’t available until Thursday due to the 43-day government shutdown. The data showed 119,000 jobs were added that month, helping allay investor fears of a major slowdown in hiring.

Is a December Fed cut off the table?

In the wake of firmer labor-market data and resilient corporate earnings, investors have dialed back expectations for a Federal Reserve (Fed) cut next month. A December rate reduction was widely expected ahead of the Fed’s late October meeting, but that probability has dropped significantly in the weeks since. Today, markets peg the odds of a cut next month at just 30%. At Russell Investments, our baseline scenario all along has been for the Fed to forgo another cut until next year.

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