November 2026 Market Update: The Price of Admission

Key Takeaways

• October’s numbers were better than what many headlines suggested. The S&P 500 slipped about 1% and remains within a few percent of its all-time high, while the average stock and bonds both finished the month higher.
• The selloff is concentrated in a crowded corner of the market. The Nasdaq 100 gave back 10% in under a month, and the AI and momentum themes that led the first half of the year are down roughly 20% from their highs, though the AI theme remains positive for the year. The largest technology companies are now funding their AI buildout from public markets rather than their own cash flow, and that risk is being repriced in real time.
• Portfolios built around The Bucket Plan® are strategic by design, built around each client’s volatility tolerance. Within that framework, our investment committee can manage risk dynamically, adjusting the size of positions as conditions change rather than trying to time the market.
• Election Day adds noise, not direction, at the level of the overall market. Since 1950 the S&P 500 has been higher in the 12 months following every midterm election regardless of which party won, and November has historically been the strongest month of a midterm year.
• Volatility like this lives in the Later bucket by design. It is the price of admission for long-term growth, and the Now and Soon buckets exist so an investor never has to sell growth assets in a month like October.

Why October Looked Worse Than It Was

If you have been watching the headlines over the past few weeks, it would be reasonable to assume the market is in serious trouble. The Nasdaq 100 entered correction territory. Technology and AI stocks have sold off sharply. Election Day is here, and the commentary around it is as loud as ever.

Here is what the headlines leave out. The S&P 500 finished October down about 1% and is still sitting within a few percent of its all-time high. A diversified portfolio holding U.S. stocks, international stocks, and bonds experienced a fraction of the decline the headlines suggest. Much of the current unease traces to what people are reading, not to what their statements show.

That gap between how markets feel and where they are is an important thing to understand right now, and it is exactly the kind of moment a well-built plan is designed for.

Staying Dynamic and Managing Risk

At Prosperity Capital Advisors, our approach to a market like this one is to keep adjusting the size of the risks we carry as conditions change, not to predict it.

That means regularly asking whether positions that have performed well have grown larger than they should be, whether the themes that led the market still deserve the weight they hold, and whether the mix between U.S. and international stocks, and between stocks and bonds, still fits the environment in front of us. When the answer changes, the portfolio changes. Our investment committee meets regularly for exactly this purpose, and it will continue to through whatever the coming weeks bring.

Our core growth portfolios were down in October. We expect that in a month when the largest companies in the index fall. What matters is that those portfolios continue to hold the allocation we believe is right for long-term growth while actively managing risk and limiting the kind of concentration that drove most of October’s losses.

What Is Actually Happening Beneath the Surface

October was less a market decline than a change in leadership.

For much of the past two years, a small group of very large technology companies carried the index. In October, money moved away from that group and toward almost everything else. The average S&P 500 stock had a much stronger October than the headline index suggested: the S&P 500 Equal Weight Index outperformed the traditional S&P 500 by nearly six percentage points, its largest monthly advantage since April 2009 and its second largest since 1990. This year, profitable small companies have outperformed both unprofitable ones and the S&P 500 itself, and international markets have kept pace with the U.S. this year after leading it in 2025.

That pattern tells us two things. First, investors are not fleeing stocks; they are rotating within them, out of crowded positions and into companies with earnings today rather than earnings promised years from now. Second, this does not yet look like a recession scare. Economically sensitive parts of the market, including small companies without profits, would be the first to break if growth were truly rolling over. Instead, they are lagging because investors are choosing quality, not because they are choosing safety.

History offers a useful reminder here. When market leadership has been this concentrated and then begins to broaden, the average stock has tended to outperform the index for an extended period, whether the overall market was rising, as in 2009, or struggling, as in 2000 through 2002. In both cases, the investor who owned a diversified portfolio of stocks and bonds fared meaningfully better than the investor who owned only the prior leaders. We do not know which of those two paths this one will follow, and we are skeptical of anyone who claims to. That is the case for building a portfolio this way: it does not depend on knowing.

If You Hold Additional AI or Momentum Exposure

Some investors have chosen to hold more exposure to themes like AI or momentum than a diversified core portfolio would carry. Our view on these themes has not changed since we first wrote about them last year: they have the potential to be transformational, and the path will be volatile. The past two months have been the volatile part. A technology can transform the economy without every investment in that technology producing attractive returns, which is why how an investor owns it matters as much as whether they own it.

It helps to be precise about what you own. We have used diversified thematic funds to gain broad exposure to the theme rather than engaging in stock picking, trying to guess which individual companies will win or lose the AI race. Those funds have taken a drawdown since the summer.

The question dominating headlines is whether the largest technology companies are overspending. Alphabet, Meta, Microsoft, Amazon, and Oracle have now disclosed a combined $3.3 trillion in future commitments for data centers, equipment, and leases, some stretching decades. It is a group sitting around a poker table pushing all of their chips in, and nobody knows yet who holds the hand and who is bluffing.

The bear case deserves to be stated plainly. Until this year, the largest technology companies funded their AI buildout from their own cash flow. That is no longer true. Their combined spending now exceeds what their operations generate; some, including Meta and Oracle, have reported negative free cash flow while others such as Microsoft remain positive, and as a group they have turned to the bond and stock markets, raising record amounts of debt and, in some cases, selling new shares, to keep building, with more large AI offerings expected to come to market. Whether public markets will keep supplying that capital on acceptable terms is the real question, and it is a fair one. What tempers it is that these companies remain extraordinarily profitable with modest debt levels, much of the spending is already locked in by signed agreements, and markets are a remarkable information-processing machine: what you have watched over the past two months is the market repricing the capital and the credit behind that spending, in real time, in exactly the companies carrying it. That is the market doing its job, not a verdict on AI.

That uncertainty is exactly why we gain exposure to the theme broadly rather than betting on any one player. We are not making big bets on individual companies, and we do not intend to. The AI story is still in its early buildout, and we would rather own the field than try to guess the winner. Our view is that the pursuit of far more capable AI, what the industry calls superintelligence, is still in its early days. We are optimistic about what it will mean for businesses and the economy for years to come, and we hold that optimism alongside a long list of open questions about cost, timing, and who ultimately captures the value. Both can be true at once, and a portfolio should reflect both.

Election Day and the Months That Follow

We do not make portfolio decisions based on election predictions, and the historical record is the reason why.

Since 1950, the S&P 500 has been higher in the 12 months following every midterm election, with an average gain of roughly 15%. That has held under unified government, divided government, and every combination of party control in between. How many seats change hands has shown almost no relationship to what stocks do next.

The pattern within the year is just as consistent. Midterm years have tended to bring weaker, choppier markets through the summer and early fall, with volatility rising into the election. November has then been the strongest month of a midterm year, higher nearly four years out of five since 1950. The reason is that the uncertainty ends, not which side wins. Markets dislike unknown outcomes more than they dislike any particular outcome.

None of this guarantees what happens this week. The month immediately after a midterm has often been flat, and one in five midterm Novembers has been negative. But if you are tempted to wait for the results before deciding what to do, history suggests the better answer is the one you already have: stay with the plan.

What Shows Signs of Improvement

Three headwinds have weighed on markets for much of this year: higher energy prices, higher interest rates, and geopolitical uncertainty. None of them has gone away, but on each there was movement in the past week that the technology headlines drowned out.

Start with oil, where the picture is mixed. Brent crude is still roughly 65% higher than a year ago and finished October higher than it started, and energy remains a large contributor to the higher inflation that has kept the Federal Reserve on a hiking bias. But on November 2 it settled roughly 7.6% lower in a single session, one of its largest daily declines of the year, on renewed hopes for a diplomatic resolution between the United States and Iran. One day does not make a trend, and prices partially rebounded the next morning. What it showed is how much of the oil price is war premium rather than supply, and how quickly that premium can come out if diplomacy holds. The Fed held rates steady last week. If energy prices do ease, pressure comes off the one remaining hike it has signaled for this year, and the conversation about future cuts can begin.

Bonds have already started to reflect that. The gain in investment-grade bonds during October, in a month when stocks fell, was the clearest sign in months that bonds can once again do their job as a cushion when stocks fall, which is why we broadened where fixed income returns come from rather than stepping away from bonds entirely. Some of that rally also reflects investors seeking safety, a reminder that the bond market is weighing slower growth as well as lower inflation. Either way, bonds did what we hold them to do.

Earnings remain the foundation, with one important caveat. Several of the largest technology companies have reported in the past week, and their cautious guidance is a real source of the current uncertainty. Outside that group, corporate profit growth has continued to run ahead of stock prices this year, which means much of the market has become less expensive even as it climbed. Lower energy costs help the margins of the average company more than they help the largest technology firms, which is one more reason the broadening we saw in October has room to continue.

None of this diminishes how much the AI trade matters. It is a significant force in this market and will remain one, and we expect it to stay volatile along the way. But it is not the only force. While the headlines focus on technology stocks, oil, rates, and earnings are also moving, and they are moving in a direction that supports the broader market.

Time in the Market, Not Timing the Market

Markets are deeply uncertain in the short term. We do not pretend otherwise, and nothing in this letter is a forecast for November. What we believe strongly, and what the evidence supports, is that returns come from time in the market, not from timing it.

Staying invested is easy when markets rise the way they did in the first half of this year. Volatility is the test. It is the moment when the plan either holds or it does not, and the plan only works if you are still in it when the recovery comes.

The risk of stepping out is being whipsawed. Consider the AI theme: if the past two months turn out to be closer to the bottom of this repricing than the top, an investor who exits now locks in the decline and misses the recovery. If instead there is more to come, the Later bucket is built to absorb it and the Now and Soon buckets mean nothing has to be sold. Neither case is improved by acting on this week’s headlines. Staying invested never means suspending judgment, though. If the case for a holding deteriorates, we act on that, and we always will. What we do not do is exit a sound allocation because a month was uncomfortable.

Our portfolios are strategic by design and we adjust within that framework rather than abandoning it when the market tests it.

Where This Volatility Lives in The Bucket Plan®

Every client we serve has a Bucket Plan, and it is built for exactly this kind of month.

The Now bucket is structured to hold the cash and stable assets that fund the next year or so of life. Nothing that happened in October touches money held this way. The Soon bucket is designed to hold the conservative investments that help refill the Now bucket over the next several years: bonds, fixed and indexed annuities, and alternatives. The bonds and conservative holdings in this bucket held their value or gained in October.

The Later bucket is where growth lives, and growth is where volatility lives. Investors with this kind of allocation may be seeing the largest monthly decline in their growth accounts in some time, which can be uncomfortable regardless of what the plan says. A 10% correction in the Nasdaq 100, a 20% drawdown in a theme, a month when the largest companies in the world lose value: this is what the Later bucket is designed to absorb, because the money in it is not needed for many years. The reason the Later bucket has historically delivered strong long-term returns is precisely because it carries this kind of risk. Volatility is the price of admission, not a flaw in the plan.

That is especially true for anyone who began investing this summer or fall, and more so for money placed in more concentrated AI or momentum-oriented strategies. Without the first half of the year to cushion the past two months, a statement may show a decline from the day investing began. That is worth holding in perspective: an allocation built for a horizon measured in years is not judged well by the month someone started. The theme behind it is the same today, at lower prices, with the same long-term case and the same open questions that existed at the time of investing.

The structure is also designed to remove the hardest decision an investor may face in a month like this one. When the Now and Soon buckets are funded this way, an investor is never forced to sell growth assets at a bad time to cover daily life. The Later bucket can do its job, which is to be patient.

What we are doing. Our investment committee continues to manage risk actively, watching the broadening in the market, the path of energy prices and interest rates, and the outcome of this week’s election, and adjusting positioning where conditions warrant it.

What we ask of you. If the headlines this week make you uneasy, talk to your advisor before making a decision. If you do not have one yet, reach out to us. We would rather walk through the buckets with you than have you act on a headline number that does not reflect an actual portfolio. If your spending needs have changed, or this stretch has shifted your view of how much risk you want to carry, that is worth a conversation, because a plan should reflect circumstances as they are today.

Sources

Market commentary reflects information available through November 2, 2026. October returns are through October 30, 2026.

1. S&P Dow Jones Indices, S&P 500 Index, October 30, 2026. October price return -0.93%; price returns exclude dividends.
2. Bespoke Investment Group, 2nd Best Month for Equal Weight Since 1990, October 30, 2026. Equal-weight outperformance of 5.85 percentage points; largest since April 2009 and second largest since 1990.
3. S&P Dow Jones Indices, S&P 500 Equal Weight Index methodology.
4. Carson Investment Research, Nine Charts on Midterm Elections, October 14, 2026, and Carson/FactSet, S&P 500 monthly performance in midterm years 1950–2025, September 20, 2026.
5. Capital Group, How U.S. midterm elections may affect markets, May 13, 2026. S&P 500 price returns one year after midterm elections since 1950, excluding dividends.
6. Alphabet, Form 10-Q for the quarter ended September 30, 2026, Purchase Commitments and Other Contractual Obligations; and Meta, Microsoft, Amazon, and Oracle Form 10-Q and 10-K filings via SEC EDGAR as of October 22, 2026; Morgan Stanley Research on aggregate hyperscaler commitments.
7. Meta Platforms, Third Quarter 2026 Results, October 21, 2026. Company-reported quarterly cash flow.
8. Microsoft, Fiscal Year 2027 First Quarter Earnings Conference Call, October 28, 2026. Quarterly free cash flow and fiscal-year outlook.
9. S&P Global Ratings, S&P Global Ratings’ View on Artificial Intelligence and Hyperscalers, August 27, 2026; FactSet Insight, Hyperscalers Tap External Financing as AI Capex Outruns Cash Flow, July 23, 2026.
10. Federal Reserve, FOMC Statement, October 28, 2026. Policy-rate range, inflation assessment, and voting record.
11. Financial Times, Oil tumbles on hopes for US-Iran talks, November 2, 2026. Brent settlement decline.
12. S&P Dow Jones Indices, S&P U.S. Aggregate Bond Index, October 30, 2026. October total-return performance.
13. Bloomberg, Russell 2000 profitable versus unprofitable constituents, year-to-date through October 30, 2026; profitable companies defined as trailing 12-month earnings per share greater than $0.

This information is provided for illustrative and educational purposes only and does not constitute personalized investment advice or a recommendation to buy or sell any security. Views and forward-looking statements reflect information available as of the stated date and are subject to change. Actual results may differ materially. References to companies illustrate market developments and are not recommendations.

Indexes are unmanaged, do not incur management fees, costs, or expenses, and cannot be invested in directly. Index returns do not represent the performance of any client account. Past performance does not guarantee future results. Diversification does not ensure a profit or protect against loss in a declining market. All investments involve risk, including possible loss of principal. Investment allocations and liquidity needs vary by client.

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