Our annual family trip to Maine was fantastic. The weather was perfect, and we all feel that this year's excursion may have been our best one yet.
Shifting focus to a more significant matter beyond our October vacation, I want to express the utmost gratitude to all the men and women who have served our country and to their families for their support. Our gratitude towards you and your family is immeasurable. Happy Veteran’s Day to all!
October Market Review:
In October, the markets broke their 5-month winning streak with their first loss since April. This decline occurred as investors grappled with Q3 earnings, the upcoming election, and uncertainty around the future path of the Federal Reserve Policy. Notably, the S&P 500 closed the month down by -0.99%, the NASDAQ by -0.52%, and the Dow Jones by -1.34%. Within sectors, Healthcare (-4.6%), Consumer Staples (-3.5%), and Real Estate (-3.3%) weighed down the market, while Financials (+2.6%) and Energy (+0.9%) stood out as the only positive performers for the month.
In the bond market, Treasury yields climbed as investors considered the possibility that the Fed may not cut interest rates as much as previously expected. Concerns about fiscal spending also drove Treasury yields higher, with expectations for continued high government spending regardless of the election outcome. The 10-year Treasury yield ended October at 4.28%, rising by over +0.65% in just over one and half months.
Just like how the unknown election uncertainties and worries impacted the treasury markets in October, it would be unwise not to offer some historical context on elections and their relationship with the markets. As discussed in last month’s summary, “while political opinions can elicit strong emotions, making investment decisions based on such sentiments can lead to less than optimal portfolio selections”. This emotional response is evident when examining the performance of the last three administrations.
1. The narrative surrounding the start of President Obama’s term in January 2009 was that his radicalism would harm the stock market. However, the S&P 500 surged by more than +200% over his two terms.
2. The narrative surrounding the beginning of President Trump’s term in January 2017 was that his election would lead to a market downturn. Nonetheless, the S&P 500 climbed by over +90% during his tenure.
3. The narrative surrounding the commencement of President Biden’s term in January 2021 was directly predicted by President Trump, stating that the markets would crash if Biden won. Nevertheless, the S&P 500 rose by more than +90% over his current term.
This compelling evidence demonstrates that the strength, expansion, and durability of the U.S. economy persist consistently regardless of the governing administration. Therefore, it is advisable not to adjust your long-term investment approach in response to emotions of each election period.
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