Market Overview

The 43-day federal government shutdown concluded on November 12 with the signing of a continuing resolution through January 30, 2026. While this removed the immediate legislative risk, the economic damage from the prolonged pause has begun to manifest in the data.

This reality checked the market's previous enthusiasm for "Growth at Any Price." As economic indicators flashed warnings of contraction, capital rotated aggressively out of speculative Technology and into the tangible safety of Value, Yield, and Small Caps.

Deep Dive: How Economic Data Drove Model Performance

November's performance was not random; it was a direct mechanical response to three specific economic signals. Here is how the data impacted the iQUANT models:

1. Manufacturing Contraction (ISM @ 48.2) → Crushed Tech

The ISM Manufacturing PMI fell to 48.2, marking the 9th consecutive month of contraction. A sub-50 ISM reading signals a slowing industrial economy, which typically hurts high-beta, long-duration growth assets the most.

Model Impact: This contractionary signal was the primary driver behind the iQ Technology Model's sharp decline of -6.68%. Investors dumped growth stocks that rely on future earnings in favor of companies with present-day cash flows.

2. Labor Market Freeze (ADP +42k) → Boosted Defensive Yield

The ADP employment report shocked the market with only 42,000 jobs added, well below forecasts. This "hiring freeze" narrative fueled recession fears, prompting a flight to bond-proxies and high-dividend equities.

Model Impact: This flight to safety directly benefited the iQ Large Cap High Yield Model (+4.91%) and iQ Large Cap Value Model (+4.43%). In uncertain labor markets, dividends become a primary source of total return.

3. Shutdown Resolution → Ignited Small Cap Value

The end of the shutdown on Nov 12 removed the "tail risk" of a U.S. credit downgrade or default. However, because the economic data was weak, the relief rally didn't go to Big Tech (which is expensive). Instead, it went to the most beaten-down, valuation-sensitive area of the market.

Model Impact: This cleared the runway for the iQ Small Cap Value Model, which surged +7.23%. Small caps are historically the biggest beneficiaries when systemic political risk is removed, provided valuations are supportive.

iQUANT Model Performance

The table below highlights the "Great Rotation" of November: Value and Yield strategies at the top, Growth and Tech at the bottom.

November Leaders (Top 5)

iQ Small Cap Value Model: +7.23%

iQ International Buyback & Dividend: +5.24%

iQ SMid Cap 10 Model: +5.17%

iQ Large Cap High Yield Model: +4.91%

iQ Large Cap Value Model: +4.43%

Year-to-Date Leaders (Top 5)

iQ Small Cap Value Model: +29.48%

iQ S&P SMid Cap Efficiency Model: +28.56%

iQ International Buyback & Dividend: +26.70%

iQ International Titans Model: +23.65%

iQ ESG 10 (Sustainable) Model: +23.33%

Outlook

The resolution of the government shutdown provides clarity on fiscal policy through January, but the economic damage—captured in the ISM and labor data—requires a defensive posture.

The rotation into Value is likely not a one-month phenomenon but a repricing of risk. We expect models with strong free cash flow and dividend support to continue outperforming until the leading economic indicators (LEIs) turn positive again.

November Market Review

Market Overview

Deep Dive: How Economic Data Drove Model Performance

iQUANT Model Performance

Outlook

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