From the desks of Stanley Katz & Lauren Madera
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Stocks climbed this past week (DJIA: +0.28%, S&P 500: +1.22%, Nasdaq: +2.06%) while the bond market took a beating. Technology and communication services did the heavy lifting for stocks. Excitement centered on Meta Platforms’ new consumer AI agent, Muse, which drew roughly 2.8 million downloads in its first two weeks, and on what the rise of agentic AI could mean for computing infrastructure demand. Bonds did not share the enthusiasm. A five-year Treasury auction drew weak demand, the 30-year yield climbed above 5.5% for the first time since 2004, and the 10-year pushed above 5.2% on Thursday. Robust business activity, rising input costs, and hawkish comments from several Fed officials pushed expectations further toward additional rate increases. Jobless claims came in below expectations, offering no argument against a Fed that sounds increasingly inclined to keep tightening.
Rates are not the only uncertainty on the calendar. Capital Group’s “Guide to Midterm Elections” arrives about six weeks before the vote, and their approach is refreshingly unpolitical. Rather than handicap the outcome, they went back more than 90 years of S&P 500 history to ask what midterm years have actually done to markets. Returns in midterm years have run roughly half the average of other years, and volatility has been meaningfully higher, peaking in the months just before Election Day. They also note that because the president’s party almost always loses seats, that outcome tends to be priced in early. Markets have historically rebounded once the voting is done, and the year following a midterm has delivered close to twice the return of a typical year. Interestingly, dating back to 1933, which party controlled Congress has made remarkably little difference to long-term returns.
Schwab’s latest “On Investing” podcast digs into where the S&P 500 stands today and what record highs might be hiding. The narrow leadership visible in this week’s sector moves is not a one-week phenomenon. Only a tiny fraction of S&P 500 members currently sit at 52-week highs, and in most sectors the figure is zero. The average member has endured a drawdown deep enough to qualify as a bear market, all while the index itself avoided even a correction. The single largest contributor to index returns has been Micron, a memory chipmaker outside the Magnificent 7 that outranks both Nvidia and Apple. The point Schwab keeps returning to is not a market call but a housekeeping one: a portfolio can drift toward concentration without anyone deciding to make it so.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
Capital Group:
Schwab:
Argus:
Northern Trust:
First Trust:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
937-293-5500
Source for weekly stock market returns: Barron’s.
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