Investment Insights: Week Ending November 6

Originally published in "Investment Insights: Week Ending November 6"
By: Aaron Wall, CFA
Partner, Portfolio Manager

Happy Friday everyone! What a week. Following Tuesday's midterm elections, the uncertainty dam has finally broken, with markets registering two of their most volatile days of the year on Wednesday and Thursday.

Market Reaction To Midterm Election Results

In the immediate aftermath on Wednesday, markets were ebullient. Five of the 11 sectors saw 90% of their underlying stocks finish higher. This led to the equal-weight S&P 500 notching new highs. Nearly 40% of the S&P 500 saw a two standard deviation daily advance, the largest such move since April of last year when President Trump tweeted out a 90-day pause on tariffs.

The underlying thoughts across the market centered around the new Congress's ability to work toward de-escalation in the Iran war while also passing legislation to limit the executive branch's tariff authority, both viewed as positive long-term developments for the market. With the AI-related names not contributing and the rest of the market accelerated, this felt more like a rebalancing event across equity portfolios away from the AI trade.

Thursday, however, saw the market digest the potential for additional regulation related to the AI data center buildout. We're still picking up the pieces, but the VIX rose from around 17 to 27 as the AI-related names took a massive step backwards. The rest of the market fell lower as well, while a general risk-off sentiment took over. The 10-year Treasury yield, after spending much of October well above 5%, accelerated downward, finishing the day closer to 4.8%. This reflects more of a de-risking event as opposed to the strong performance seen on Wednesday.

Final Thoughts

We remain convicted in the opinions we've held throughout the year. Economic growth remains robust. S&P 500 earnings in 2026 appear to be reaching growth levels rarely seen outside of the immediate response to a recession. Midterm years tend be volatile, but this one largely stayed tame until election week. Post-election volatility is common, and we'll continue to process how the policy objectives of the new Congress may impact specific sectors of the economy.

If you haven't already, we encourage you to read our Investment Committee's "Outcomes and Takeaways Overview from the Midterm Elections" for real-time thinking around how we are incorporating the election into our work.

Markets have woken up this week, and we've seen the good and the bad clustered together in short order. As always, please know that your Fidelis team is here and happy to answer any questions or comments.

Closing Time

That's all for this week, see you next Friday. Until then, keep up with us on LinkedIn.

If you have any questions or concerns, please reach out to a member of your Fidelis Capital team.