by Connor Darrell CFA, Assistant Vice President – Head of Investments
Equity markets endured another week of losses, with both the Nasdaq and S&P 500 entering correction territory (a correction is a technical term describing a decline of more than 10% from previous highs). International stocks continued their slide as well.
As is typical during periods of market stress, bonds generated positive returns as investors sought refuge from the volatility. Economic data released during the week suggested that rising interest rates may be impacting home buying decisions, as completed home sales declined meaningfully.
Volatility is Normal Around Mid Term Elections
After several quiet months, volatility has returned with a vengeance in October. We recently released a note that delineated some of the risks that have been blamed for the selloff, including rising interest rates, trade and tariffs, and geopolitics. We continue to believe that none of these issues are likely to fully derail the bull market, and further contend that the volatility we have experienced in recent weeks is normal for a mid-term election year. In fact, dating all the way back to the FDR administration, markets have averaged an intra year decline of 17% during mid-term election years, only to recover meaningfully over the following 12 months. Decades of market history have taught us that timing the markets is nearly impossible, and that selling too early could be just as detrimental as selling too late. The aura of uncertainty created around mid-term elections makes that endeavor even more difficult and given the strength of the underlying fundamentals that drive markets, maintaining a disciplined approach remains the most prudent course of action. Read our October Market Volatility Note