It’s That Time of Year Again. . .

Markets should remain cautiously optimistic, with healthcare and energy infrastructure favored as AI spending, inflation and interest-rate risks create greater volatility.

• The S&P 500 has delivered positive total returns in all 19 post-midterm-election years since 1950, averaging 20.9%, although outcomes ranged from 1.4% in 2015 to 37.6% in 1995.
• Alphabet fell 12% after earnings and Caterpillar declined 9% despite beating expectations, while investors are watching October CPI on November 10, late-November results from Nvidia and Walmart, and the Federal Reserve meeting on December 8-9.
• Real GDP grew 3.4% in the third quarter, with a significant contribution from AI-related capital spending that is consuming the cash generation of major technology companies and raising questions about future returns on invested capital.
• Rising data-center demand is contributing to component shortages and inflation in consumer electronics, while higher energy prices are supporting opportunities in energy infrastructure and technologies that can manage electricity demand.
• Consumer discretionary stocks were down 2.8% year to date on October 30, compared with a 17.3% gain for consumer staples, and the firm extended average duration in fixed-income portfolios from just under two years to close to three years.
• Expected 2027 earnings growth exceeds 15%, while the S&P 500 forward price-to-earnings ratio is 17.9 times versus 20.9 times for 2026, based on Bloomberg data from November 2.

Takeaway: The firm remains overweight healthcare and sees further potential in energy infrastructure, while keeping a shorter-duration bias in rising-rate conditions and monitoring AI capital-spending guidance, energy costs and the funding appetite for companies such as Anthropic and OpenAI.