Investment Updates From Savvy Financial

Every election seems to come with a market forecast attached. Which sectors win. What happens to rates. Whether stocks rally or sell off once the votes are counted.

It’s easy to confuse the outcome we want with the one we think markets will reward.

To successfully invest based on that view means you’d have to do more than pick the winner. You would need to know who controls Congress. Then what they can actually get passed. Then how markets will react to all of it, and whether that reaction is already priced in. Each step is its own forecast.

We would rather respond to what markets are actually doing at any actual moment in time than depend on getting that sequence of predictions right.

This month’s Note looks at the midterm elections, what history can and cannot tell us about how markets react to them, and why a systematic investment process does not need to know the winner.

But first, here’s a summary of the global asset classes utilized in our portfolios and their exposures for November.

Most forecasts assume the market is going somewhere. Every year starts with a list of them. Where rates will end up. What oil will do. How far stocks can run. Up or down, each one picks a direction.

This summer, the market mostly went nowhere. Stocks stalled after a strong start. Bonds fell at the same time. The part of the portfolio meant to provide stability didn’t.

Navigating that on forecasts would have meant calling three things at once:

1. The 10-year Treasury yield breaking above 5%
2. Oil rallying hard on top of it.
3. Stocks stalling without ever breaking down.

We would rather respond to what markets are doing than depend on calling all three.

This month’s Note looks at a summer that tested traditional portfolios, why the ability to adapt matters more than the ability to predict, and what a systematic investing process does when markets rise, fall, or go nowhere.

But first, here’s a summary of the global asset classes utilized in our portfolios and their exposures for October.