Monthly S&P 500 forecast for November 2026
November 1st, 2026
Our monthly S&P 500 forecast for November is a 1.90 percent increase over the October 2026 average.
The model-based forecast accounts for changes in oil prices and wages. However, a forecast model cannot possibly capture the full impact of uncertainty caused by tariff wars and geopolitical tensions, such as the war in the Middle East.
October, a month of two halves
At the end of September, historically the most notorious month for stock performance, the S&P index was at 7652. October started well, and in the first half of the month, the index traded above 7700.
In the second half of the month, the S&P 500 index did not have a good run. Rising oil prices and inflation due to the war in the Middle East, approaching mid-term US elections, and mega-tech earnings were among the factors behind the sell-off. Our October forecast for the average of the S&P 500 index was spot on last month. Comparing the end-of-month values, the index was down (1.62%) at the end of October.
US economic indicators were generally good in October except inflation: a resilient labor market, stronger-than-expected (Q3) GDP, and consumer spending growth.
Mid-term elections increase market volatility
Historically, high volatility before mid-term elections is common because of increased uncertainty. The U.S. midterm elections will take place on November 3. In midterm elections, voters elect all 435 seats in the U.S. House of Representatives and roughly one-third of the U.S. Senate.
Even with a divided election result (Republicans losing the majority in both chambers), a post-election stock-market rally can be a likely outcome. The President’s executive powers would still allow Trump to impose tariffs without congressional approval unless Democrats pass a bill requiring congressional approval for tariffs. Overall, markets would likely welcome such a development.
Mega-tech Q3 results dampen investor enthusiasm
As the Q3 earnings season is underway, investors are scrutinizing Big Tech earnings more closely. Amazon received a similar reaction after missing its EPS target despite strong operating margins. Alphabet (Google) was punished by a stock sell-off for its falling core search ad revenue despite the exceptional performance of its Cloud business. Meta Platforms faced criticism over its aggressive multi-year spend on AI hardware despite its robust top-line growth. Nvidia’s shares also fell despite beating both the revenue and EPS expectations and raising its full-year outlook. Microsoft was the only Big Tech company so far to get a positive reaction, with impressive top- and bottom-line beats.
Overall, investors are focusing on gross margins and earnings expectations as anxiety grows over a possible AI bubble-bust scenario.
Another factor driving investor scrutiny is the state of the bond market financing AI infrastructure. Rising inflation and Treasury yields affect the massive long-dated bond issuance by big tech to fund planned capex spending. Big Tech’s increased vulnerability to the pitfalls of debt financing is making investors more cautious concerning tech stocks. If Big Tech struggles to pay back its bond obligations, the systemic risk to the US and global economy would be tremendous. High interest rates also reduce equity valuations.
PMI falls, but consumer confidence improves
The Chicago Purchasing Managers’ Index (PMI) fell to 55.3 in October from 58.8 in September. This was below the market forecast of 56.1. Despite the fall from the previous month, the index remained in expansion in business activity territory. Production fell 5.2 points, while Order Backlogs declined 4.4 points. It remains to be seen whether the latest decline in the index is an early sign of the cooling in economic activity.
The Conference Board’s consumer confidence index rose by 7.5 points to 91.7 (1985=100) in October, up from 84.2 in September (a slight upward revision). The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased by 8.6 points to 120.4. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—recovered by 6.9 points to 72.6. The survey period for this month’s preliminary results was October 1-21.
US consumers have not felt very optimistic about the economy since the start of the pandemic. The Middle East conflict and rising energy prices contributed to the deterioration in consumer sentiment in September. As oil prices eased in the survey period, consumers’ sentiment improved. However, both WTI crude and Brent crude oil prices climbed over the $100 mark in the last week of October.
Inflation surges, Q3 GDP growth accelerates
The annual inflation rate in the US rose to 3.7% in September. This was above the market expectations of 3.6%.
Personal consumption expenditures (PCE), a key barometer of inflation and consumer spending, rose 3.6% in September from 3.4% in August on an annual basis.
Core PCE, which excludes the more volatile food and energy categories, edged up to 3.1% in September from 3% in August.
US Q3 gross domestic product (GDP) grew at an annualized rate of 3.4%, up from 2.2 percent in Q2. This was the advance estimate for Q3. The reading was above economists’ expectations of 3.1% (Source: Bureau of Economic Analysis (BEA)).
Fed holds its target rate unchanged in October
The Fed’s target range for interest rates is 3.75% to 4% after the 25 bp rate increase in September. Despite the rising oil prices due to the Middle East conflict, the Fed held its target range unchanged in its October meeting. This aligned with market expectations of no rate hike before December.
In the post-pandemic period, the Fed’s monetary tightening was criticized as too slow, causing a prolonged period of elevated prices. Given that Q3 GDP growth was very strong, with a resilient labor market and surging inflation, the Fed’s decision to keep rates unchanged is a risky strategy.
President Trump’s easing of sanctions on Russian oil is unlikely to reduce inflation. The volume of fuel entering U.S. or Western markets is small relative to total consumption, so the price impact is insignificant. Therefore, if the war in the Middle East continues in November, a 25 bp rate increase in December is highly likely.
S&P 500 index is currently undervalued
According to FactSet Insights from September 25, the forward 12-month P/E ratio for the S&P 500 is 18.7. This P/E ratio is below both the 5-year average (19.8) and the 10-year average (19.1).
For Q3 2026, the estimated (year-over-year) earnings growth rate for the S&P 500 is 30.2%. If 30.2% is the actual growth rate for the quarter, it will mark the third straight quarter of earnings growth above 25%.
Overall, the index is currently undervalued, given high earnings forecasts driven by the AI boom and the latest sell-off in tech stocks.
Our monthly S&P 500 forecast is a model-based fair-value estimate. Announcements of tariffs and cancellations cannot be captured in our model unless the impact appears in historical data. The model captures the possible impact of geopolitical tensions through keyword searches (Google clicks) and the advanced retail sales index. However, these variables perform better in normal times. Our quarterly S&P 500 forecast discusses these issues in more detail.
