Equity Market Commentary - November 2026 Addendum

The midterm-driven equity selloff has created selective opportunities within the market, while inflation and Federal Reserve policy remain the main risks to the broader outlook.

• The S&P 500 has risen six and twelve months after all 19 midterm elections since 1950, while the 2006 post-election gains reached 5% after three months and 9% after six months.
• The index was down about 6% from its recent high on November 5, 2026, below the roughly 15% decline that the author considers a more attractive level for broad-market buying.
• A forward S&P 500 P/E of 17.8x and continuing upward earnings revisions have limited downside, although the author would become more interested below the 7,000 level.
• Beneath the index, iShares SOXX had fallen 40% from its June high, DRAM had fallen 55%, and the AI beneficiaries basket had fallen 46%, reflecting a severe unwind in crowded positions.
• Consumer staples had their strongest month in 20 years and healthcare outperformed the Nasdaq by 16% in October, yet earnings-revision breadth deteriorated in both sectors; the author therefore sees the rotation as flows into perceived defensives rather than fundamental improvement.
• The author expects AI infrastructure construction to slow after the Democratic victory, while Meta and Oracle show how hyperscalers can work with local communities; he views political demands for community funding as compatible with continued development.

Takeaway: Investors should look beyond Washington-driven volatility toward earnings revisions and sector-level dislocations, while monitoring inflation because a path toward the Federal Reserve’s 2% target could support a higher market multiple and persistent inflation could force further rate hikes in 2027.