3 in 3: Sifting Through the Noise of Midterm Elections

Election-driven volatility is creating opportunities in consumer stocks, AI infrastructure suppliers, and defense companies whose underlying demand remains stronger or more structural than the headlines suggest.

• US consumers face high prices, borrowing costs, and energy costs, but the largest banks and a recent meeting with Walmart's management indicate that spending and credit are holding up; Walmart is confident enough to begin pushing through more pricing.
• A possible improvement in inflation or borrowing costs could therefore trigger a meaningful rebound in consumer stocks, although investors should remain prudent.
• The AI infrastructure debate has shifted from whether demand exists to who will finance the buildout: CoreWeave's stock fell more than 15% in one day, its bond yields approached 15%, yet its revenue backlog was about $104 billion at the end of June.
• The Pentagon is considering moving from thousands of semi-autonomous weapons toward hundreds of thousands and potentially millions of cheaper systems produced at scale, a proposed model that could reorder the winners and losers across defense.
• Election volatility may persist after November 3, but the S&P 500 has returned more than 10% annually over the 30 years to September 30, 2026, despite repeated elections, conflicts, and crises.

Takeaway: Investors should look beyond the midterm headlines and focus on durable demand, financing risks, and changes in procurement; volatility can expose opportunities where fundamentals have not deteriorated, but the defense spending shift remains proposed rather than fully approved.