Market Correction Normalcy
In this November 2025 market update, we address the nature of recent volatility to help investors maintain a long-term perspective. It is crucial for investors to remain objective during these periods, as market pullbacks are a frequent and healthy component of the investment cycle. Historical data over the past 85 years indicates that 5% corrections have occurred in 94% of all years. Deeper 10% corrections happen approximately every 18 months and typically last about four months. Importantly, only about 20% to 25% of these corrections ever evolve into a true bear market. While short-term monthly returns often show extreme volatility, the long-term trajectory of major indices like the S&P 500 has historically trended upward, rewarding those who stay the course rather than reacting to fear.
The $7.5 Trillion Money Market Opportunity
Current market conditions show a historic level of capital sitting on the sidelines, with $7.5 trillion currently held in money market funds. This massive reservoir of potential investment is split between roughly $3 trillion in retail assets and $4.5 trillion in institutional funds. As the Federal Reserve moves to lower interest rates, the yields on these cash equivalents are expected to drop. This environment will likely prompt a rotation of funds back into stocks and bonds. This significant shift of liquidity could act as a catalyst to reignite market rallies and support asset prices as investors seek returns beyond cash instruments.
Small Caps vs. Large Caps in the November 2025 Market Update
We may be approaching an inflection point regarding the valuation gap between small-cap and large-cap stocks. While large-cap stocks have outperformed since 2022, small-cap companies currently trade at attractive valuations, specifically regarding price-to-book ratios, while projecting strong earnings growth of 22% to 26%. Historical patterns from as far back as 1979 suggest that small caps often outperform large caps following economic slowdowns. With the changing interest rate environment, small-cap stocks appear well-positioned to potentially lead performance in the 2026-2027 cycle.
If you have questions about how this November 2025 market update impacts your personal financial plan, please contact our team to discuss your portfolio positioning.