THE RESULTS ARE IN
The results of the midterm elections are in, and as most expected, the Democratic Party has taken control of the House. But Democrats will also have a majority in the Senate. Much like when President Trump won in November 2016, the initial reaction in Dow futures was dramatically negative, only to reverse course the following morning. As I wrote about last month, the stock market tends to hate uncertainty more than it hates any particular political party. Futures started down early in the evening, but reversed course the day after the election.
Democrats will now hold the majority in both chambers of Congress, but they won't have a veto-proof majority. This matters because, about an hour after telling the New York Times he was “absolutely willing to accept” the results and would "work with the Democrats," Trump posted a hat with the word "veto" on it. Meanwhile, Robert Garcia, who is in line to lead the House Oversight Committee, issued a two-word message to the White House: "Lawyer up."
This may be music to the ears of staunch Democrats who are tired of President Trump's direct approach on so many issues. But those looking for any substantive policy changes will probably be disappointed. More than likely, we'll see gridlock in Washington, D.C., for the next two years.
The stock market likes certainty, and it isn't much of a stretch to believe that Democrats will spend the next two years investigating the Trump administration, while President Trump keeps his veto pen handy, ready to reject any legislation that comes his way that he doesn't agree with.
Gridlock.
WHAT’S AHEAD IN THE MARKETS?
The U.S. stock market kept investors on their toes in October, with stock prices swinging wildly behind the scenes even though the main market average barely budged. This kind of waiting period, known as a "market consolidation," is normal after big gains, but it leaves the market at a crossroads where it could either climb higher or take a sharp turn downward.
To help make sense of where we stand, here is a breakdown of the competing forces driving the market right now:
The Bright Side (Why the Market Could Rise)
Better "bargains" are appearing: Even though the main market index stayed flat over the last five months, many individual stocks quietly dropped 10% to 20% in price. At the same time, company corporate profits (earnings) stayed strong. Because earnings went up while stock prices stayed flat, stocks are essentially "on sale" compared to earlier this year. This is reflected in improved price-to-earnings (P/E) ratios—a standard tool used to measure whether a stock is overpriced or a good value.
The AI engine is still running hot: The underlying demand for AI technology, microchips, and computing power remains very strong, keeping the foundation of the current tech boom intact.
The Warning Signs (Why the Market Could Drop)
The Federal Reserve is raising interest rates: Historically, when the central bank makes borrowing money more expensive to cool down the economy, it acts as a major drag on the stock market. We've seen market interest rates jump significantly since February.
The AI honeymoon period is ending: Investors are getting pickier. Tech giants like Amazon, Meta, and Google gave weaker-than-expected forecasts for the future, proving that the big tech companies are no longer moving up together as a single group.
The credit squeeze is starting: Building massive AI data centers requires billions of dollars in borrowed money. Because interest rates are higher, banks and lenders are getting much stricter, separating the AI companies with good financial health from the ones that are risky bets.
What We Do Next: Follow the Data
When the market is this evenly split between good news and bad news, guessing is a losing strategy. Instead, it is much safer to rely on an objective, unemotionally driven investment system to manage risk step-by-step:
Recent adjustments: Last month, the Core Strategy pointed us to shift some money into safe cash reserves.
Historically, the stock market has a nearly perfect track record of rising in the 6 to 12 months following U.S. mid-term elections.
As always, history is not a perfect indicator of the future, but statistics point to a positive level of conviction that the stock market should be higher by year-end than it was Nov. 3rd (Dow 51,786 and S&P 500 7,568) 1. We’ll report on that in our January 2027 edition.
TACTICAL ASSET ROTATION STRATEGY (TARS) RESULTS
THE CORE STRATEGY
The Core ETF Strategy is comprised of 3 of the following 6 asset classes: U.S. Stocks, International Stocks, Real Estate Stocks, Gold, US Bonds and Cash (1-3 mo Treasuries). They are evaluated on a relative-strength basis and re-ranked 1 through 6 each month. Clients are in the top 3. Typically, the CORE makes up 30% of a client portfolio. The Core TARS portfolio is designed to share in some of the bull market’s gains, while minimizing (or even preventing) losses during bear markets. “Win by not losing.”
Technology stocks took a beating in October, down 8-10% for the month, depending upon which sector ETF you look at that tracks these stocks. The S&P 500 index is weighted heavily towards technology stocks and was down -0.94%. Unlike the past few years where over-weighting technology has resulted in positive returns, the equally weighted S&P 500 was up +5.0% in October, while SPYG (Growth) Index that overweights technology, was down -5.6% for the month.
International stocks were slightly down -0.94% for the month and our “Cash” holding SGOV (0-3 month Treasuries) was up +0.35%. Overall that had the Core slightly down for the month.
Here was the performance of the Core ETFs for October(2)
US Stocks (SPY) - 0.91%
International (EFA) - 0.94%
Cash (SGOV) + 0.35%
There are no changes for November.
SECTOR ETFS
The TARS Sectors that are chosen based upon the same momentum strategy as the Core ETFs. I evaluate 85 Sectors and we make changes if they fall out of the top quartile.
Healthcare and Energy stocks were the big winners in October. Moderate, Moderate Aggressive, and Aggressive investors are in Biotech (XBI), which had a small loss in October, but is still solidly in the top quartile of the list of 85 sectors we track.
Here is the performance of the Sector ETFs for October(2)
Biotechnology (XBI) - 1.08%
*Moderate and Moderate Aggressive allocations
There are no changes for November.
WORLD ETFS
I evaluate 64 country and world ETFs. Aggressive portfolios hold a 7% allocation to 2 country ETFs and Moderate Aggressive have a 2.5% allocation each.
World funds had a rough October. Both Emerging Market ex-China (EMXC) and Austria (EWO) were down for the month. Despte the negative returns, both EWO and EMXC were in the middle of the top quartile for the month.
Here is the performance of the World ETFs for October(2)
Austria (EWO) - 7.10%
Emerging Market ex-China (EMXC) - 9.47%
There are no changes for November.
OTHER FUNDS
Vanguard High Dividend Yield Fund (VYM) has been a highlight for both October and the year. For the month it was up 5.50% and year-to-date is up 14.09%. Most clients have a 10% weighting to VYM.
Here is the performance of these funds for October(2)
Vanguard High Dividend Yield Stock Fund (VYM)* + 5.50%
Paradigm Select (PFSLX)** - 4.69%
*Conservative, Moderate Conservative, Moderate & Moderate Aggressive allocations hold VYM.
** Moderate Aggressive & Aggressive allocations hold PFSLX.
There are no changes for November.
FIXED INCOME ETFS
PAAA (PGIM’s AAA Ultra Short Bond Fund) makes 20% of Conservative allocations, 10% of Moderate Conservative and Moderate allocation, and 5% of Moderate Aggressive allocations. It has a current yield of 5.33%. FLOT floating rate has a 10% weighting in Conservative allocation. The PIMCO Income Fund (PIMIX) makes up 10% of all but the Aggressive Growth allocations. For Moderate Conservative and Moderate allocations, FLOT has been swapped out for the Guggenheim Macro Opportunities Fund (GIOIX).
For those in non-retirement accounts where we are seeking to limit taxable income, I have substituted the Short-term Nat’l Muni (SUB), North Square Tax-Advantaged Professional Income (QTPI), and PGIM Ultra Short Muni (PUSH).
Here is the performance of the fixed income funds in October(2)
PGIM AAA Ultra Short Bond (PAAA) + 0.46%
PGIM Short Term Muni (PUSH) + 1.26%
Short-term Nat’l Muni (SUB) + 1.76%
Invesco Floating Rate (FLOT) + 0.27%
Guggenheim Macro Opportunities (GIOIX) + 0.91%
Lord Abbett Floating Rate (LFRIX) - 3.29%
North Square Tax-Advantage Income (QTPI) - 0.22%
There are no changes for November.
ALTERNATIVE HOLDINGS
The JP Morgan Equity Premium fund (JEPI), writes covered calls on S&P 500 holdings for additional premium returns yields 8.16%. Real Asset Allocation (RAA) is a diversified asset allocation fund that utilizes the same relative strength strategy as our Core Strategy with the inclusion of not just stocks, bonds, and gold, but commodities, metal miners, managed futures, Bitcoin, TIPS, Emerging Market Bonds, and more. RAA is currently 10-20% of every risk strategy. It has been a solid holding up 9.78% YTD.
For Aggressive Growth clients, we moved back into Commodities (SDCI) in September with a 1.96% return and followed it up with a +1.48% return in October.
Here is the performance of the alternative funds in October(2)
Real Asset Allocation (RAA)* - 10.03%
JP Morgan Equity Premium (JEPI)** + 3.01%
SummerHaven Dynamic Commodities (SDCI)*** + 1.48%
*All portfolio allocations hold RAA
**All portfolio allocations except for Aggressive hold JEPI
***Aggressive Growth allocations hold SDCI
There are no changes for November.
REFERENCES
1. Yahoo Finance, November 3, 2026
2 Morningstar October 30, 2026 Monthly Returns.
DISCLOSURES
The analysis and commentary in this Market Commentary is general in nature and does not take your personal circumstances into consideration. It is not intended to be a substitute for specific, individualized financial advice and investors should obtain legal, accounting and tax advice from a qualified tax professional, accountant or attorney.
The information provided in this Market Commentary, including any strategies, methodologies, and opinions, is expressed as of the date hereof and is subject to change. EverSource Wealth Advisors, LLC assumes no obligation to update or otherwise revise these materials.
This Market Commentary relies upon historical data, and much of the information presented is not intended to be performance reporting or representation, whether hypothetical or actual. Reports on the performance of various strategies are gross, not net, and do not take into account our fee or various third-party charges such as trading charges. Individual Exchange Traded Fund (ETF) performance in the commentary are monthly returns of all ETFs utilized across client accounts in various asset allocation percentages based upon risk tolerance. They are gross returns and not net of advisory fees. Each client’s returns will vary based upon the percentage of each ETF held, in addition to other variables, such as: allocations to money market funds, additional individual stocks or mutual funds held, and date of entry into each holding.
Actual results will vary from the analysis. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, expressed or implied is made regarding future performance or the accuracy of the information herein.
This material is provided for informational purposes, is intended for your use only, does not constitute an invitation, solicitation, or offer to subscribe for or purchase any of the products or services mentioned. It is likewise not a recommendation that you purchase, sell, or hold any security or other investment or pursue any investment style or strategy.