Last week I told clients that Election Day might bring a day or two of noise. It brought more than that. Stocks had their best day in months on Wednesday, gave all of it back and then some on Thursday, and bounced a little on Friday. I wanted to send a quick update on what happened, why it probably happened, and how to think about it.

1. The Post-Election Seesaw
Democrats won control of both the House and the Senate on Tuesday. Futures dropped Tuesday night as results came in, then turned around once it was clear the outcome would be accepted and wouldn’t be dragged out.

Wednesday was a big relief rally. The Dow gained about 1,570 points (+3.0%), its best day since April 2025 and its best day after a midterm election since 1982. The S&P 500 rose 1.6% and the Nasdaq 1.4%.

A few things drove it:

  • Gridlock. Markets usually like it when neither party can push through sweeping changes. This was a fairly normal midterm result and close to what betting markets expected.
  • Oil dropped hard. Oil fell 7 to 9% on Wednesday on hopes of a quicker end to the conflict with Iran. WTI went from about $104 a week earlier to under $90.
  • Big tech led. Apple rose 6% to a record and passed a $5 trillion market value. Microsoft and Amazon were up 6 to 7%.

Not everything went up, though. Nvidia, CoreWeave, and other AI infrastructure names fell on Wednesday. That turned out to be the warning sign for Thursday.

2. What Happened Thursday
Thursday wiped out Wednesday’s gains and more. The S&P 500 fell 4.4%, its worst day since the tariff selloff in April 2025. The Nasdaq dropped 5.5% and the Dow lost about 1,830 points (-3.4%). The Nasdaq is now in correction territory, about 12% below its high from last month.

The damage was in AI and chip stocks. The semiconductor index fell 12%, its worst day since March 2020, and every stock in it was down. Micron fell 17%, AMD 17%, and Nvidia 9%. Nvidia is now slightly down for the year after three huge years.

The trigger connects back to the election. Candidates in both parties campaigned against new AI data centers because of higher power bills, and the new Democratic governor-elect in Texas ran on a moratorium on new data center approvals. Goldman Sachs estimates the states likely to tighten oversight account for about 45% of planned new U.S. capacity. Add in high borrowing costs and the AI bubble talk that’s been building for weeks, and the market decided to sell first and ask questions later.

Friday brought a small bounce. The Nasdaq rose 1.1%, the S&P 500 0.3%, and chip stocks recovered about 4%, with AMD up 11%. The Dow slipped 0.5%. For the week, the S&P 500 fell 2.7%, its worst week since June. The Nasdaq lost 3.4% and the Dow 0.9%.

Best day in months on Wednesday, worst day since April 2025 on Thursday.

3. Some Perspective
I’m not going to pretend a 4% day is nothing. It isn’t. But it helps to look at what actually moved and what didn’t.

This was mostly an AI and chip selloff. The Dow only lost 0.9% for the week, and communication services stocks were up almost 5%. A diversified portfolio likely felt a lot less than the headlines suggest.

The economy looks fine. Friday’s jobs report showed 165,000 jobs added in October, more than double what was expected. Unemployment dipped to 4.1%, and the prior two months were revised higher. Wages are up 3.1% over the past year, roughly keeping up with inflation. That isn’t what a recession looks like.

Rates and oil are moving the right way. The 10-year Treasury yield ended the week around 4.86%, down from over 5.3% last month. Oil fell about 13% this week. Both take pressure off consumers and businesses.

The catch is the Fed. A strong jobs number with inflation still running hot means the Fed is more likely to hike again in December. Markets now put those odds at roughly 78%, up from 70% before the report. Higher borrowing costs are part of why investors are nervous about how all this AI spending gets paid for.

History is on the side of patience. The panic index jumped this week and ended Friday around 25.6, elevated but well below crisis levels. And according to J.P. Morgan, the S&P 500 has gained about 15% on average in the 12 months after every midterm election since 1950. That’s an average, not a promise, but the year after a midterm has been one of the better stretches of the four-year cycle.

4. How Unusual Was This?
Two pieces of data stood out to me this week.

4% days have historically been followed by gains, not more losses. Since 1952, the S&P 500 has had 56 other days where it fell 4% or more. On average, it was up about 1% the next day and the next week, 2% a month later, and 6.7% three months later. For comparison, the average three-month gain across all periods is about 2.2%. Big drops tend to bring buyers in, and the bounce has usually been stronger than a normal stretch.

After the 56 prior 4%+ drops, the average 3-month gain was about three times a normal stretch.

Pullbacks like this happen all the time. As of Thursday’s close, the S&P 500 was down about 6% from its October 6 high. That’s the 3rd pullback this year and the 34th time since the March 2009 low that the market has fallen more than 5% from a high. Every one of them had a reason that felt scary at the time: Europe’s debt crisis, Ebola, trade wars, COVID, inflation, AI bubble fears. The median decline was 7.6% and lasted 26 days. About two-thirds of them never even reached a 10% drop.

Every bar felt like the end of the world at the time. This one is the red bar on the right.

The market still went from about 680 in March 2009 to over 7,000 today. Those 34 pullbacks were the price of admission.

Neither of these is a guarantee. But they’re a good reminder that a day like Thursday is a normal part of investing, not a sign that something is broken.

5. Closing
Here’s how we’re approaching it from here:

  • Leaning on diversification. The parts of the market that held up this week are the reason we own more than a handful of names.
  • Buying the dip in top tech companies. Some of the best businesses in the world just got cheaper, and we’re using that to add where it fits each client’s plan.
  • Listening to what companies say about AI spending going forward. That’s the question driving the market right now, and the next round of earnings calls should tell us a lot.

This post is an excerpt from a private client newsletter on 11/7/2026.