To The Moon

As we hit mid-November 2025, the investment community is buzzing with year-end debates: Is there still gas in the tank for this bull market, or should we brace for a cooldown? The forum prompt captures this tension perfectly, highlighting tailwinds like Fed rate cuts, AI-driven earnings, and strong corporate results, while cautioning about lofty valuations and potential volatility. But before diving into predictions for the S&P 500 or Nasdaq's final moves of the year—and spotlighting a standout sector—let's address the elephant in the room: the supposed "significant market pullback" since November began. Based on my analysis of recent data, this narrative doesn't hold up. Instead, we've seen a robust rally, and understanding its drivers is key to gauging what's next.

Before jumping into predictions, it's essential to unpack the significant market pullback we've seen since early November 2025 and the key factors driving it. Drawing from recent data and trends, this isn't a random dip but a confluence of built-up pressures in a market that's been riding high for much of the year. My analysis here is independent, focusing on observable patterns rather than consensus views.

Unpacking the November 2025 Pullback: Data and Drivers

Since November kicked off, major indices have indeed retreated, confirming the cautionary side of the forum debate. Using SPY ( $SPDR S&P 500 ETF Trust(SPY)$ ) as a proxy, the index opened in November at around 685 on November 3, but by November 7, it had slid to a close of 670.97—a drop of approximately 1.8%. While not a crash, this qualifies as a significant pullback in the context of recent volatility, erasing gains from late October and prompting broader risk-off moves. The Nasdaq has seen similar pressure, with tech-heavy names leading the downside.

This downturn isn't emerging from nowhere; it's the result of several interconnected factors that have been simmering throughout 2025:

1. Frothy Valuations and Tech Overextension: After a banner year for AI and growth stocks, valuations have reached unsustainable levels. The S&P 500's forward P/E has climbed above 23, with tech giants trading at premiums that demand flawless execution. Recent earnings reports showed some cracks—tempered guidance on AI spending and adoption rates—leading investors to question the hype. Wall Street heavyweights, including bank CEOs, have flagged this as a prime risk, warning of a potential correction as expensive tech stocks weigh on the broader market.

2. Persistent Inflation and Policy Headwinds: Despite the Fed's rate cuts earlier in 2025, inflation has ticked up slightly, raising doubts about further easing. Combined with ongoing tariff policies and trade uncertainties under the current administration, this has created a choppy environment. Shifting dynamics in global trade, including escalated duties, are increasing costs for companies and stoking fears of slower growth. These aren't new issues, but their accumulation in late 2025 has amplified investor anxiety.

3. Economic Soft Spots and Sentiment Shift: Broader indicators point to cooling momentum. Resilient consumer spending has shown signs of fatigue, and overly bullish sentiment earlier in the year has flipped to caution. Technical signals, such as the S&P testing key moving averages, are flashing warnings of overbought conditions unwinding. This pullback feels like a healthy reset, but it's been exacerbated by year-end factors like portfolio rebalancing.

In my view, this pullback is more of a valuation-driven breather than a harbinger of deeper trouble. Fundamentals remain solid—earnings growth is still positive, and AI profits continue to support key sectors—but the market needed to digest its gains.

My Outlook for the Final Stretch of 2025: Cautious but Not Bearish

As we count down to 2026 with about seven weeks left, I see the pullback stabilising, but risks tilting toward modest downside before a potential rebound. The forum's highlighted supports (Fed cuts, AI profits, earnings beats) are real, but they're offset by the valuation and policy concerns noted above. Volatility could persist, but I don't foresee a major meltdown.

1. Prediction for the S&P 500 or Nasdaq Before Year-End: Focusing on the S&P 500, I predict it will move lower in the near term but could flatten or edge higher by December's end if positive catalysts emerge. Directionally, expect a test of lower supports (perhaps around 6,500-6,600), representing a 3-5% further dip from current levels, driven by year-end selling and uncertainty. The Nasdaq, more vulnerable to tech resets, might lag with steeper swings. That said, a "Santa Claus rally" isn't off the table if inflation data softens or earnings surprise upward.

2. The Sector I Believe Will Perform Best: The November pullback provided a crucial clue. While high-flying AI application stocks were hammered, some "picks and shovels" infrastructure stocks (like data storage firms) held up or even hit new highs.

This informs my pick. The "AI-driven profits" narrative is correct, but investors were focused on the wrong part of the story. The single biggest, non-negotiable bottleneck for the entire AI revolution is power.

The sector I believe will perform best is Energy. My Rationale:

• AI's Power Demand: The AI data centres being built by Meta, Google, Amazon, and Microsoft require a staggering, unprecedented amount of electricity. This isn't a future-tense problem; the demand is hitting the grid now.

• Defensive in a Slowdown: As the private jobs data and consumer sentiment suggest a slowdown, the Energy sector acts as a defensive hedge. It provides a necessary commodity, and as we saw this week, investors rotate into defensive sectors like energy and healthcare during volatility.

• Undervalued & Inflation Hedge: Unlike the tech sector, which is grappling with its high valuations, analysts widely see the energy sector as fundamentally undervalued. It also serves as a natural hedge if the stagflation fears (slowing growth, persistent inflation) sparked by tariffs and the shutdown turn out to be true.

While the Nasdaq is sorting out its valuation crisis, the energy sector is selling the essential, physical-world commodity needed to power the entire AI boom, making it a more resilient and value-oriented way to play the theme.

Final Thoughts: Embrace the Reset, Position Wisely

The countdown to 2026 brings a mix of opportunity and caution—lock in profits where valuations feel stretched, but don't abandon the bull thesis entirely. This pullback, rooted in overextension and uncertainty, could set the stage for fresh gains in the new year. My perspective is grounded in the data, not herd mentality. What's your take? Join the forum discussion—we might snag those prizes!

This analysis is as of November 8, 2025. Markets shift rapidly, so conduct your own research.

@TigerWire @Tiger_SG