Perspective on Post-Election Decline

Thursday was a difficult day in the stock market, and I know it was unsettling to watch. Here's my perspective on what happened, what didn't change, and what long-term investors can do about it.

What happened

On Thursday, November 5, the S&P 500 fell 4.4% to 7,353.73 and closed about 6% below the record it set in October. The Nasdaq Composite, which is more heavily weighted toward technology companies, fell 5.5% and finished roughly 12% below its high.

The heaviest selling hit chipmakers and other companies tied to artificial intelligence. Investors reconsidered how quickly new data centers will be built following Tuesday's election results in several states where data center projects have faced local opposition.

A repricing, not a verdict on AI

I'd caution against reading Thursday as a verdict on artificial intelligence itself. The technology is real, and its benefits are beginning to show up in the economic data. What the market appears to be reconsidering is a narrower assumption: that every company involved in the AI build-out would prosper together, and on the same timetable.

Some will and some won't. It's healthy for stock prices to start reflecting that difference, even when the adjustment is abrupt.

The economy beneath the headlines

The broader economy, meanwhile, remains on solid footing:

• Productivity rose 3.6% in the third quarter, well above its historical average of 2.2%, helped in part by the practical adoption of AI. Over time, productivity is the foundation of rising living standards and corporate profits.
• Weekly unemployment claims recently registered 189,000, close to a 57-year low, and job openings exceed seven million and are still rising. Output of durable goods such as machinery and equipment is up 3.7% over the past year.
• Third-quarter earnings for the S&P 500 are on pace to grow nearly 30% on a 12% increase in revenue.
• Goldman Sachs, among others, estimates S&P 500 earnings of $415 per share in 2027. At Thursday's close, that places the index at about 17.7 times expected earnings (the price-to-earnings ratio, a common gauge of how much investors pay for each dollar of profit), close to its 30-year average of 17.2 and nearer to that average than it has been in some time.

What history does, and doesn't, tell us

Recent history offers some encouragement. In the spring of 2025, the S&P 500 fell nearly 19% amid tariff fears, bottomed on April 8, and set a new record by late June. After war with Iran broke out on February 28 of this year, the index fell as much as 9% and closed at a new record on April 15, about seven weeks later.

It would be a disservice to suggest every decline resolves that quickly. The decline that began in January 2022 lasted ten months, took the S&P 500 down roughly 25%, and the index didn't reach a new high until January 2024, two full years after its previous peak. Since the end of World War II, the S&P 500 has fallen 20% or more seventeen times, by an average of about 30%, or roughly once every five years.

The long-term return of stocks has been earned by enduring those episodes, not by avoiding them. I don't know whether Thursday marks the beginning of something brief or something more prolonged, and no forecast is needed to act sensibly.

What this means for long-term investors

This is why we build our clients' portfolios with both possibilities in mind. Broad diversification and regular rebalancing are designed for days like Thursday, and a well-built plan shouldn't need to change because of one difficult session.

If you're wondering what to do this week, here's a short checklist:

1. Confirm your near-term cash needs. If you expect to draw on your investments in the next year or so, make sure those funds are set aside so you're never forced to sell stocks after a decline.
2. Revisit your plan, not the headlines. Ask whether anything in your life has changed: your goals, your timeline, or your income needs. If not, your allocation likely shouldn't either.
3. Let rebalancing do its work. Declines are when disciplined rebalancing, trimming what has held up and adding to what has fallen, quietly earns its keep.

If you'd like to talk through how your plan is positioned, I'm always glad to hear from you.

In the meantime, I hope you'll take this week in stride, as I am, and enjoy these beautiful fall days.

Reid Culp, CFA, CFP®
Owner, TAGStone Capital