Markets Shrug Off Disappointment After Red Wave Fails to Materialize, Climb on Decelerated Inflation Numbers

We saw three major influences on the markets this week: the midterm elections, the weeklong drama around the collapse of cryptocurrency exchange FTX, and Thursday’s inflation-data releases. Ultimately, the market ended the week strongly. The SPX was up 5.88% for the week, the Nasdaq rose 7.78%, and Treasury yields fell, with the 10-year ending the week at 3.82%, down from 4.16% last Friday.

Monday saw markets rise slightly ahead of Election Day, with investors showing their enthusiasm for the prospect of a Republican-controlled Congress that, alongside a Democratic President, would mean a more frequently gridlocked government – widely believed to result in fewer regulations, lower taxes, and bigger corporate profits – and thus higher stock prices. SPX was up 0.1% and the Nasdaq rose 0.9%. Election Day saw the SPX up 0.56% and the Nasdaq up 0.49%.

Markets slid on Wednesday as the morning after investors saw control of Congress yet to be determined. The SPX fell 2.08%, the Nasdaq declined 2.48%, and the VIX rose to 26.01. Republican hopes for a dominating wave the night before did not materialize. As our US Policy expert Tom Block notes, most expect Republicans will ultimately win control of the House but without the overwhelming majority they had undoubtedly hoped for...