A Volatile Post-Election Week: Stocks Slide as AI Worries Resurface

A Volatile Post-Election Week: Stocks Slide as AI Worries Resurface

U.S. equities fell sharply last week, with the S&P 500 down 2.67%, the Nasdaq Composite down 3.37%, and the Dow Jones Industrial Average down 0.94%. Growth stocks bore the brunt, with the Russell 1000 Growth down 4.98% versus the Russell 1000 Value down 0.49%, while the Russell 2000 fell 2.03%. International markets were also lower, with the MSCI EAFE down 1.84% and emerging markets down 4.08%. Technology fell 6.9% and Energy fell 11.9%, while Consumer Discretionary, Communication Services, Real Estate, Financials, and Consumer Staples gained. Year-to-date, the S&P 500 is up 8.78%, the Nasdaq is up 6.25%, and the Dow is up 8.06%.

Jobs Rise, Manufacturing Cools

The October jobs report showed payrolls rose by 165,000 and the unemployment rate edged down to 4.1%. Separately, the S&P Global Manufacturing PMI was revised down to 54.9, though it remains well above the 50 level that separates expansion from contraction.

Midterms Spark AI Worries

Following last Tuesday’s midterm elections, in which Democrats won control of both the House and Senate, investors initially welcomed the prospect of reduced political uncertainty. Attention then shifted to the implications for artificial intelligence, as several newly elected state and local officials advocated for slower deployment and increased regulation. Given the market’s heavy reliance on the AI buildout theme, that shift in sentiment weighed on equities, pushing the VIX to its highest level since April and producing the S&P 500’s largest single-day decline in more than a year on Thursday. J.P. Morgan’s pre-election estimates pointed to modest S&P 500 moves under any outcome, and it viewed fears of AI regulation under a Democratic sweep as overdone, since new federal limits would face a presidential veto.

Perspective After the Plunge

History offers perspective on days like Thursday. J.P. Morgan’s review of the ten largest daily S&P 500 moves since 1987 shows that sharp declines were often followed by meaningful reversals, typically much larger than the market’s average daily move, and that each of those historic declines was ultimately overcome as markets recovered and moved higher. Thursday’s selloff remains well short of many of them. Our accompanying chart adds election-cycle context: since 1933, the S&P 500 has averaged a total return of 8.6% in midterm election years, compared with 11.6% in presidential election years and 15.9% in non-election years. Excluding 2002 and 2008, the midterm-year average rises to 10.0%. Midterm years have historically been the softest of the three, but the average has still been positive. The period after Election Day has historically been stronger: since 1990, the S&P 500 has averaged a 14.7% gain over the twelve months following a midterm Election Day, according to J.P. Morgan, which also notes the index has been higher a year later after every midterm since 1950. As always, we do not position portfolios around elections or other short-term catalysts; changes come from a longer-term view.

Treasury Yields Ease Further

Treasury yields eased further, with the 10-year at 4.86% and the 30-year at 5.26%, down from 4.94% and 5.31% the prior week, and the 2-year at 4.51%, down from 4.56%. The Bloomberg U.S. Aggregate Bond Index gained 0.40% for the week and is up 2.85% quarter-to-date, trimming its year-to-date loss to 0.15%.

Energy Slides, Gold Rebounds

Energy fell 11.9% last week as WTI crude dropped to about $91 per barrel from about $104 the week before, though the sector remains the strongest of 2026, up 40.9% year-to-date. Gold rose to roughly $4,050 per ounce from about $3,913, still below its year-end level of roughly $4,368.

Looking Ahead

Looking ahead, CPI and PPI readings headline the week’s economic calendar.

As Always

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.