MONTHLY MARKET MUSINGS

November 2026

Looking Past the Noise

Inflation and interest rates remained top of mind throughout October, with the U.S. Federal Reserve (Fed) and the Bank of Canada (BoC) taking different approaches to monetary policy. The Bank of Canada raised its overnight rate by 25 basis points to 2.50%, its first increase in more than three years, as persistent inflationary pressures forced it to move away from its neutral position. However, signs of a stagnating economy have begun to emerge, leaving the BoC with a difficult balancing act between controlling inflation and supporting a slowing economy.[1] In contrast, the U.S. Fed held its policy rate steady at 3.75%–4.00% as they look to balance inflation against a continued solid of economic backdrop.[2]

Equity markets, in general, faced a challenging volatile month. In Canada, strength in the energy sector as well as the consumer staples and consumer discretionary sectors helped support the S&P/TSX Composite Index (TSX). In the U.S., technology (tech) stocks faced renewed pressure as investors, once again, questioned the scale of artificial intelligence (AI) investments and the overall timeline and path to realizing returns and profitability. These concerns are not new. Over the past year, we have experienced many similar moments of uncertainty which have weighed on tech stocks, only for the markets to regain momentum as corporate earnings and demand for AI infrastructure continue to demonstrate strength. While these short-term setbacks are frustrating, the longer-term growth outlook is still supported by the robust earnings and sustained investment of the sector. The recurring pattern serves as a useful reminder that market sentiment can change quickly, often in response to emotions and uncertainty but that underlying fundamentals ultimately play a more critical role in determining long-term returns.

As we have noted previously, the volatility over the past few months is a build-up from the ongoing stress between resilient corporate earnings and uncertainty surrounding inflation, monetary policy and geopolitical risks. September and October have historically been among the weakest months for U.S. equities and often exhibit heightened volatility making the recent market weakness less surprising from a seasonal perspective.The final two months of the year have historically delivered more favourable returns for equities, with November and December tending to rank among the strongest months. U.S. midterm elections have also, historically provided encouraging signals for the markets. According to JP Morgan, U.S. equity indices have gained during the 12-month period following midterm elections since the 1950s. During that time frame, the S&P 500 Index averaged a gain of 15.1% in those 12 months that followed.[3] Of course, historical and seasonal patterns are no guarantee of future performance. They do, however, help to reinforce the importance of looking beyond near-term headlines and weakness rather than if the immediate volatility signals a lasting deterioration in the market fundamentals. The key distinction is between volatility that reflects a genuine weakening in fundamentals and volatility driven primarily by temporary shifts in sentiment and expectations. When the two of these become disconnected is when opportunities emerge for disciplined investors who remain focused on the underlying drivers of long-term returns.

In the end, the challenge is to look past the noise without ignoring the actual risks. This is where navigating the markets shifts from a mathematical driven analysis into an art that draws from experience, perspective and prudent judgement. Uncertainties surrounding interest rates, the tech sector, and geopolitical developments warrant attention, but investment decisions should be guided by long-term fundamentals and rational analysis rather than short-term market reactions. Successful investing depends less on forecasting every single setback and more on maintaining your discipline as you are experiencing them.

JAY SMITH, Ph.D, CIM®, FCSI®
Senior Portfolio Manager & Senior Wealth Advisor
jay.smith@cibc.ca

BRAD BROWN, MBA, CFA®
Portfolio Manager & Associate Investment Advisor
brad.brown@cibc.com

[1] https://ca.finance.yahoo.com/news/tsx-falls-ai-spending-fears-133044535.html

[2] https://www.theguardian.com/business/2026/oct/29/economy-growth-third-quarter

[3] https://finance.yahoo.com/markets/stocks/articles/us-stocks-done-every-midterm-114500900.html