ALTERNATIVE MARKETS UPDATE – MID NOVEMBER 2025

The past two weeks have brought a notable recalibration in US macro expectations, with direct consequences for European markets. The end of the government shutdown removed immediate fiscal uncertainty, but the accumulated delay in key releases - most importantly labour-market indicators and core inflation data - left policymakers and investors operating without the usual reference points. As these figures begin to return, the Federal Reserve has adopted a more tempered tone, prompting markets to rethink the likelihood of a December rate cut. Current pricing assigns a 43% probability to such a move, down from effectively 100% one month ago when investors were contemplating the possibility of deeper easing. This shift, combined with firmer Treasury yields, underscores a market still grappling with uneven economic signals, particularly around labour-market resilience. Geopolitical tensions remain present but secondary, adding a marginal layer of caution rather than driving sentiment directly. For Europe, the more significant channel is policy divergence. While the ECB maintains its current stance and observes softening regional indicators, the evolving US trajectory complicates expectations for 2026 and beyond. The resulting environment has contributed to higher cross-asset volatility and a more defensive investor tone, as both regions confront a landscape where policy clarity remains limited and incoming data may still produce outsized market reactions.

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RESEARCH PERSPECTIVE VOL. 263 November 2025 Alternative Markets Update The past two weeks have brought a notable recalibration in US macro expectations, with direct consequences for European markets. The end of the government shutdown removed immediate fiscal uncertainty, but the accumulated delay in key releases - most importantly labour-market indicators and core inflation data - left policymakers and investors operating without the usual reference points. As these figures begin to return, the Federal Reserve has adopted a more tempered tone, prompting markets to rethink the likelihood of a December rate cut. Current pricing assigns a 43% probability to such a move, down from effectively 100% one month ago when investors were contemplating the possibility of deeper easing. This shift, combined with firmer Treasury yields, underscores a market still grappling with uneven economic signals, particularly around labour-market resilience. Geopolitical tensions remain present but secondary, adding a marginal layer of caution rather than driving sentiment directly. For Europe, the more significant channel is policy divergence. While the ECB maintains its current stance and observes softening regional indicators, the evolving US trajectory complicates expectations for 2026 and beyond. The resulting environment has contributed to higher cross-asset volatility and a more defensive investor tone, as both regions confront a landscape where policy clarity remains limited and incoming data may still produce outsized market reactions. Equity markets over the past two weeks have broadly reflected the macro uncertainty emerging from the shifting US policy outlook. In the US, the reassessment of December rate-cut expectations and the return of delayed economic data have contributed to a more cautious tone. Mega-cap technology names, already carrying elevated valuations, faced renewed scrutiny as investors weighed the sustainability of AI-related capex and the leverage underpinning parts of the sector. This dynamic drove a gradual rotation toward defensives and higher-quality balance sheets, amplified by rising volatility ahead of key US labour-market and inflation prints. Earnings sentiment has been mixed, with companies offering limited forward visibility, which further reinforced the risk-off bias across US equities. In contrast, Europe showed relative resilience, supported by a more stable policy backdrop and the absence of the valuation extremes seen in parts of the US market. While sentiment remained fragile, European indices generally held up better, benefitting from their heavier exposure to defensive sectors and from investors seeking pockets of stability. The combined effect has been a two-speed equity environment, with US markets adjusting more visibly to the changing macro narrative while Europe outperformed on a relative basis, albeit within a still cautious and volatility-prone framework. Despite the challenging ecosystem, equities have not seen significant declines recently, as shown in Figure 1. Figure 1: Indexed Performance of the S&P 500 and Euro Stoxx 50 Since October 2025, Source: Investing, November 2025 The sharp pullback across major digital assets over the past two weeks reflects a decisive shift in risk sentiment as global markets recalibrated to a less dovish Federal Reserve outlook. Bitcoin fell from above $123k in early October to roughly $94k - a decline of around 20% - with the move driven initially by rate-sensitive unwinds and later by broader risk-off flows. Ethereum saw a steeper adjustment, dropping from approximately $4,600 to $3,100 (around –30%), while Solana experienced the highest decline in the group, falling nearly 40% from $230 to just below $140. Figure 2 shows the development of the aforementioned digital assets since the beginning of October 2025. The differential performance highlights a clear divergence between blue-chip assets and the broader token universe. Institutional flows have concentrated in BTC and ETH, whereas altcoins lagged amid lower liquidity and more rapid deleveraging. Market structure conditions helped prevent disorderly moves. Spreads remained functional, funding rates normalised, and derivatives positioning reset in an orderly manner, even as overall volatility rose. Still, the episode underscored how tightly crypto markets have become linked to macro-policy expectations. Rising yields and the fading probability of near-term Fed cuts reduced appetite for high-beta digital assets. Figure 2: Indexed Performance of Bitcoin, Ethereum, and Solana Since October 2025, Source: CoinMarketCap, November 2025 STONE MOUNTAIN CAPITAL Stone Mountain Capital is an advisory boutique established in 2012 and headquartered in London with offices Pfaeffikon in Switzerland, Tallinn in Estonia and Dubai and Umm Al Quwain in United Arab Emirates. We are advising 30+ best in class single hedge fund and multi-strategy managers across equity, credit, and tactical trading (global macro, CTAs and volatility). In private assets, we advise 10+ sponsors and general partners across private equity, venture capital, private credit, real estate, capital relief trades (CRT) by structuring funding vehicles, rating advisory and private placements. As of 14th June 2025, Stone Mountain Capital has total alternative Assets under Advisory (AuA) of US$ 62.9 billion. 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