November’s FAFO market: A liquidity opera that refused to break

November felt like a month scripted by a mischievous market god — the kind who enjoys jolting traders out of their convictions before handing them a warm cup of liquidity and whispering: “Relax, child… don’t fight the Fed, and for heaven’s sake don’t fight the machines.” What began as a neatly packaged year-end glidepath quickly devolved into a full FAFO tape: rate-cut probabilities convulsed, AI darlings cracked, volatility spiked like a panicked geyser, and macro confidence swung from euphoria to nausea and back again. And yet, somehow, after surviving all that, the S&P finished November essentially flat. Only this market could host a full-fledged drama and leave no footprints in the monthly close.

But beneath the placid headline numbers lived a proper cross-asset opera. The same traders who spent the first half of the month rummaging through the wreckage of their factor books suddenly found themselves riding one of the strongest everything-rallies of the year. Stocks, bonds, Bitcoin, gold, silver, and even junk credit all surged into Thanksgiving like a liquidity-drunk marching band. It wasn’t just a bounce — it was a coordinated reversal worthy of a Fed/Treasury rescue reel. Markets collectively shrugged off AI valuation alarms, government shutdown anxiety, and mid-month growth scares and instead rediscovered the comfort blanket that now governs every cycle: policy easing is back in play, and the AI capex engine hasn’t stalled; it’s reorganizing.

The irony is that the month began with perfect storyboarding. Rates were drifting lower into a gentle cutting cycle, 2026’s tax-refund tailwind was on the horizon, forward EPS estimates hovered in the 300–310 range, and the seasonal Nov–Dec runway looked pristine. Historically, when the S&P is already up 15% by late October, Santa doesn’t need much encouragement. But the Fed, never one to let traders get too cozy, decided to take a hammer to forward guidance. December cut odds swung from near certainty to barely a coin toss, and every asset class convulsed in unison. Vol erupted. Factor exposures imploded. Mega-caps wobbled. Even the ultra-crowded AI trades endured a proper “prove it” moment.

But the moment the Fed’s messaging wobbled back toward dovishness — the moment the job-market softness began showing up in unemployment data and regional Fed surveys — the entire market exhaled. The VIX collapsed from near 28 back to the high-teens in a blink. Dealers flipped into positive gamma. Correlations normalized. Hedge-fund de-grossing faded. And the entire cross-asset complex snapped back as if the mid-month scare were just a poorly timed hallucination. It was the S&P’s best Thanksgiving week since the financial crisis — a reminder that in liquidity-driven markets, fear is tolerated only briefly before the tide returns to wash the shoreline clean.

If you traded November from the short side, the tape delivered a painful sermon. Passive investors, those quiet monks of beta, have been rewarded beyond reason — the flagship S&P ETF is closing in on another record year of inflows, up more than $125 billion. Meanwhile, the “smart contrarian” trade has been a slow, methodical loss of blood. Inverse leveraged ETFs have been obliterated, down north of 80% this year. The most-shorted basket is up almost 30%. Tail hedges eked out modest gains but have been helpless against the speed and magnitude of liquidity-driven rebounds. November’s great unmasking was simple: under all the stress, the market still kneels before liquidity, not valuation orthodoxy.

Even the CME outage — a cooling failure that froze major futures across equities, rates, and commodities — couldn’t break the spell. In another era, a central engine of the market going dark would have triggered outright panic. This time it was treated like a quirky market anecdote: an annoying detour, not a derailment. Cash markets, ETFs, and OTC pipes absorbed the flow, and the tape marched higher uninterrupted. It was a striking example of how overwhelming the liquidity impulse was: even the pipes could groan, and the current still pushed everything forward.

The AI rotation was the other great November story — not the collapse the doomers wanted, but the maturity the cycle needed. The “everyone wins” phase of AI cracked decisively. Mega-caps no longer rose in unison. The Mag 7 fractured: one of the former AI titans posted its worst month since 2022, while another surged 7% in a single week. Momentum posted its worst month since early 2023. This is how real themes evolve. The baton isn’t being dropped — it’s being passed to more selective hands. AI is no longer a monolithic trade; it’s a competitive ecosystem where leadership rotates, monetization matters, and capex excellence becomes religion. The story hasn’t died. It has graduated.

Meanwhile, the metals complex delivered a masterclass in physical tightness. Gold stabilized through the mid-month turbulence and stretched its winning streak to four months. But silver — silver stormed the stage like a metal possessed. Seven straight monthly gains, new record highs, a gold/silver ratio collapsing toward critical support, and unmistakable signs of structural tightness driven by Chinese industrial demand, disappearing inventories...

...and visible backwardation.

In a month where narratives were fragile, silver was the one asset that traded on fundamentals so pure that even crypto couldn’t compete. Bitcoin had its worst month since mid-2022, and although it clawed back to $90k by week’s end, the message was clear: in a world where liquidity drives everything, physical scarcity still has seniority.

By the time the final session closed, November had taught the Street three core truths. First, liquidity still rules the empire. When the Fed signals easing and the machines keep scaling, sell-offs burn hot but die quickly. Second, the AI revolution is not a bubble popping; it’s a leadership filtration system. Excesses are being purged, not the narrative. And third, November’s madness ultimately cleaned the tape. The factor shakeout, the Mag 7 reset, the ripping of complacent momentum trades, the macro uncertainty, the CME glitch — all of it flushed out the sloppy hands and left December with something traders rarely get: a cleaner starting point.

There’s still a caveat hanging over the door. Fed cutting cycles aren’t always bullish. If labor softening morphs into real deterioration, the policy mix shifts from normalization to triage, and equities historically don’t enjoy the view from that room. But we’re not there yet. Right now, we’re trading a “soft ice” landing — cooler growth, gentler inflation, friendly policy, and early tremors of AI-driven productivity.

So heading into December, I’m keeping my core framework simple: don’t fight the Fed, don’t fight AI, and don’t fight liquidity when it floods the field. November’s great FAFO episode reminded everyone what it costs to stand against all three at once. The market may wobble, but liquidity is still the conductor, and until that baton changes hands, the music tends to resolve upward.

One final question for everyone out there: should we be worried that AI Darlings don’t buy the Bounce? o

Clearly, ORCL refuses to play along with the latest squeeze in AI? (debt issue canary?)

And NVDA is also refusing to get excited about the AI bounce (competition canary?)

Chart’s of the week

Institutional investors are bullish on Gold and tech stocks

Gold: Prices for the precious metal have hit record highs this year, driven in part by surging central bank buying. Almost 70% of institutional investors expect gold prices to rise further by the end of 2026, according to a poll of more than 900 clients on Goldman Sachs’ Marquee platform conducted from November 12-14. The largest proportion of respondents—36%—think gold will exceed $5,000 per troy ounce by the end of next year (gold traded at $4,158 on November 27).

Central bank buying of gold and fiscal concerns were seen as the main drivers for the precious metal’s prices in 2026 by 38% and 27% of respondents, respectively.

Equities: Heading into 2026, investors are still the most bullish on tech stocks despite recent volatility in that sector. Some 44% of respondents said they expect the technology, media, and telecommunications sector to outperform in 2026. Respondents are the least bullish on consumer stocks and view an “AI downshift” as the biggest risk to equities, followed by a slowing in economic growth.

Rates: Investors expect two rate cuts from the US Federal Reserve in the first half of 2026. About 34% expect the Fed funds rate to finish 2026 in the 3-3.25% range, as compared to the current 3.75-4% range.

Fuel cells could help meet the power demand from data centers

As AI drives a steep increase in power demand from data centers, fuel cells could allow companies to spin up a new source of low-carbon-emission electricity relatively quickly, according to Goldman Sachs Research.
The global power demand from data centers is forecast by Goldman Sachs Research to increase 175% by 2030 (versus 2023) as companies ramp up training for energy-intensive AI models. The jump in power demand is the equivalent of adding another top-10 power consuming country to the world’s power needs.

One way of looking at this is that energy is becoming intelligence, and that may be its most important incremental use since the industrial revolution,” says Michele Della Vigna, head of Natural Resources Research in EMEA in Goldman Sachs Research.

• Behind-the-meter (BTM) energy systems outside the utility grid, from onsite gas turbines to fuel cells and geothermal plants, could help meet the additional power demand from data centers, according to Goldman Sachs Research.
• BTM systems are expected to provide a quarter to a third of the incremental electricity demand from data centers that’s anticipated through 2030.
• Modular fuel cell systems can be deployed in less than a year, are 10-30% more efficient than gas turbines, operate with much lower noise, and produce fewer emissions than some other energy systems. Fuel cells are electrochemical power generators that convert fuel such as natural gas or hydrogen directly into electricity without combustion.
• Goldman Sachs Research estimates that 6-15% of incremental power demand from data centers could ultimately be provided through fuel cells.

CME goes dark, but the street never blinked

When a major venue like CME or EBS suddenly freezes, the screens always make it look like the world has slipped on a stray banana peel. Gold blows out from a civilised 10-cent spread to a full dollar on the secondary platforms, index futures go motionless, and the retail front-ends start reading like museum exhibits. But on an actual bank trading floor, this sort of outage barely moves the emotional needle. The big houses have spent decades preparing for precisely this kind of plumbing failure. The system is engineered with the same redundancy mindset as an aircraft cockpit—assume the primary avionics will fail, assume the backup might cough, and make sure the pilot can still land the plane regardless.

So when CME disappeared yesterday, the desks didn’t flinch—they simply shifted rails. FX traders diverted flow from EBS to Reuters Matching, 360T, Hotspot, or straight bilateral chats. Rates desks hedged CME downtime with cash Treasuries, swaps, or ETFs. Equity index traders leaned on SPY or bespoke baskets. Commodities teams reverted to the old reliables: spot XAU, OTC swaps, cross-asset proxies. None of this is improvisation. These are built-in, well-worn escape routes embedded into the architecture so that a benchmark can vanish and the book still has somewhere to breathe. It’s why the institutional tape kept functioning while some platforms, especially retail-heavy ones, suddenly looked like the lights were out.

And crucially, everyone grasped immediately that this wasn’t a systemic event; it was a cooling failure in one Chicago data hall—a pure mechanical outage, not a credit blow-up or counterparty landmine. When traders know it’s “plumbing” rather than “Lehman,” the instinct is to preserve optionality, not torch risk. Add in the fact that it was the thin, post-Thanksgiving tape—low conviction, reduced staffing, algos already dialled down—and the professional playbook became obvious: widen your quotes, disable the machine flow, keep the book light, and avoid doing something you’ll regret when the main venue blinks back to life.

The dramatic movements you saw—gold widening from pennies to dollars—were simply a function of platforms whose liquidity providers rely almost entirely on CME for hedging. Without the anchor, those LPs hit the brakes. You quote wide or you don’t quote at all; that’s survival, not panic. Meanwhile, in the institutional core, nothing broke. Proxy marks kept valuation systems alive, OTC markets absorbed hedging demand, and the entire episode passed like an inconvenient intermission rather than a liquidity earthquake.

In the end, the market didn’t panic because it didn’t have to: the redundancy worked, the microstructure behaved, and the experienced hands treated it as what it was—a garden-variety technical outage, not the start of a crisis.