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The Midterms and Your Portfolio

2026-11-03

Democrats are widely expected to win the House in this year’s midterm elections, and are favored at this point to win control of the Senate as well. What should these elections mean for your portfolio? Not much. First, markets have likely already priced in expected election results and their potential impact. Second, historically speaking, it would generally have been unwise to let politics drive your portfolio, as markets have tended to rise over time, whether the President was a Democrat or Republican. Macrotrends has a chart that can show the Dow Jones Industrial Average for Presidents all the way back to Harding:

We only went back 50 years, through the Ford Administration. The DJIA rose, often by large percentages, for every Administration except for two—the Carter Administration, under which the DJIA’s return was marginally negative, and the George W. Bush Administration, which was hit by the Financial Crisis during the last 18 months of his term. CNBC also has a chart that characterizes market returns based on Presidential and Congressional control:

While divided government has slightly outperformed single-party control, we would shy away from drawing robust conclusions based on small samples. The simplest takeaway from this graph is that markets have tended to rise no matter what combination of Democrats and Republicans maintained Congressional or Executive control.

JMS Capital Group Wealth Services LLC

417 Thorn Street, Suite 300 | Sewickley, PA | 15143 | 412‐415‐1177 | jmscapitalgroup.com

An SEC‐registered investment advisor.

This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument or investment strategy. This material has been prepared for informational purposes only, and is not intended to be or interpreted as a recommendation. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice.

Bonds vs Stocks

2026-10-15

Treasury rates have risen significantly over the past year. For example, the 10-year Treasury rate has climbed higher than it’s been for over a decade:

If we look back further, yields may be settling back into historical norms, in contrast to the exceedingly low rates of the 2010s:

Does the rise in yields make bonds relatively more attractive? Sure. Should your portfolio shift to a bond-heavy allocation? Ben Carlson argues that while bonds are now better positioned to provide portfolio diversification, the long-run outperformance of stocks remains compelling. Carlson points out that for most 10-year periods, stocks provided better returns, often by wide margins:

While long-term history heavily favors equities, stocks have at times had poor decades, such as the 1970s and 2000s. At such times, as Carlson observes, bonds provided a useful portfolio ballast:

With the notable exception of 2022, when both stocks and bonds cratered, bonds usually rose during down years for stocks. With the 10-year Treasury yielding over 5%, bonds are in their best position in years to provide portfolio support in the event of an equities downturn. For those investors concerned about a possible AI bubble, bonds have become an increasingly viable option for portfolio diversifi

JMS Capital Group Wealth Services LLC

417 Thorn Street, Suite 300 | Sewickley, PA | 15143 | 412‐415‐1177 | jmscapitalgroup.com

An SEC‐registered investment advisor.

Interest Rate Movements

2026-09-18

The Fed raised the federal funds rate by 25bp, to 3.75%-4.00%, at its September meeting. While this move was widely anticipated, a rising rate environment marks a significant shift from Fed and market projections from last December:

Both the Fed and markets had expected the federal funds rate to fall by 25bp-50bp in 2026, and then ultimately settle in the 3.00%-3.50% in the longer run. In the last 9 months, however, progress against inflation has unfortunately reversed:

Source: Federal Reserve

Core PCE inflation is expected to be about 3.4% in 2026, which would represent an undoing of the modest downward movement of the past 3 years. The Fed is currently projecting 1 more 25bp rate increase in 2026, and perhaps another in 2027:

Source: Federal Reserve

12 out of 18 FOMC participants expect 1 more 25bp rate this year, to 4.00%-4.25%; for 2027, there’s a minor split between those 8 individuals who expect rates to be 4.25%-4.50%, and the 10 who anticipate rates of 4.00%-4.25%, or lower.

Markets, however, are somewhat more pessimistic. CME FedWatch’s market derived numbers suggest that the federal funds rate is most likely to end up at 4.50%-4.75% by the end of next year:

Source: CME FedWatch

AI’s heavy demand for credit, as well as large U.S. fiscal deficits, have helped push long-term Treasury rates higher, with the 10-year rate hovering at about 5% and the 30-year rate over 5%. With shorter-term rates of about 4% as well, the ultra-low interest rates of the 2010s are becoming an increasingly distant memory.

JMS Capital Group Wealth Services LLC

417 Thorn Street, Suite 300 | Sewickley, PA | 15143 | 412‐415‐1177 | jmscapitalgroup.com

An SEC‐registered investment advisor.

AI Links

2026-09-04

Here are some of the AI-related writings that caught our attention this past month:

1. Reed Albergotti interviewed Bill Gates, whose views on AI have shifted dramatically in three years, from optimism to fears of economic catastrophe and bio-terrorism

2. Gates’ post, which can be found here, expresses three primary concerns—broad job displacement, increased ability for bad actors to cause widespread harm, and stunted childhood social and educational development

3. Seeking an AI analogy, Justin Wolfers writes about the Victorian bootmaking industry, which experienced technological disruption beginning around the 1850s, from the advent of the sewing machine. The good news is that total industry employment shifted, but didn’t shrink—the decline in artisanal boot-making jobs roughly equaled the increase in factory boot-making jobs

4. The (potential) bad news is that the shift in boot-making manufacturing and employment occurred over about a 50 year period. If AI brings much more rapid change, then productivity increases may be accompanied by much more pain in labor market transitions

5. Erik Brynjolfsson, Bharat Chandar, and Ruyu Chen find that so far, AI hasn’t had broad-based employment effects, but employment for young people in AI-exposed occupations is 19% less than what it would have been if they were less exposed to AI. As the authors note, the question is whether reduced employment for subsets of 22-25 year olds is the canary in the coal mine

JMS Capital Group Wealth Services LLC

417 Thorn Street, Suite 300 | Sewickley, PA | 15143 | 412‐415‐1177 | jmscapitalgroup.com

An SEC‐registered investment advisor.

Rising Interest Rates

2026-08-21

The 30-year Treasury yield climbed to 5.31% on August 17th, which marked its highest level since June of 2007. Long-term interest rates have risen fairly steadily since the end of the Covid-induced recession:

Good News, (Potential) Bad News on the Economy

2026-06-05

The May jobs report was unexpectedly strong, as nonfarm payrolls grew 172,000, well above

Are There Rising Interest Rates on the Horizon?

2026-05-29

Although President Trump has been hectoring the Fed to lower the federal funds rate for quite some time

May Charts and Links

2026-05-15

Here are some of the writings that caught our attention this past month

The S&P 500 Has Reconcentrated

2026-05-11

For the past year or so we had seen a broadening of the bull market with respect to the S&P 500.

Iran Blockade… Two Weeks or Two Months?

2026-04-24

Last week, President Trump imposed a blockade on Iranian ports.