This Week in Review | S&P 500 Record High, Fed Minutes, Spain Election

Transcript

Hello and welcome to This Week in Review.

This weekly segment is designed to highlight a few things you may have missed this week, what they could mean for financial markets, and why they matter to investors like you. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com. Now, let's review what happened this week.

A new S&P 500 record high.

This Tuesday, the S&P 500 closed at another all-time high. This new record extends a rally that has carried stocks through concerns about interest rates, inflation and geopolitics. A new record high can raise questions about whether stocks have gone too far too fast, but history suggests investors should be careful about equating a new high with a market peak. After all, the S&P 500 hit its last record high two months ago on August 13th, yet has continued to climb. To us, it's a reminder that all-time highs are often mile markers on a bull market's journey, not a stop sign signaling that the run is over. Of course, that doesn't mean stocks will move in a straight line from here. Short-term volatility is normal and market leadership will likely continue to evolve. It's also worth remembering where we are in the political cycle. With US midterm elections approaching, we anticipate the return of what we call the Midterm Miracle. This nine-month period, beginning in the fourth quarter of midterm years, frequently sees positive returns. That's because the president's party often loses congressional seats. This change in power dynamics increases political gridlock and reduces the chance for sweeping legislation that could introduce uncertainty into the market. For investors, the bigger lesson here is not to view this record high as a last hurrah. Instead, look at this week's milestone as another reminder that stocks can continue climbing despite the concerns dominating headlines.

Next, minutes from September's Federal Reserve meeting.

On Wednesday, the Federal Reserve released minutes from its Federal Open Market Committee September policy meeting, giving investors a closer look at the discussion behind the central bank's first interest rate hike since 2023. The FOMC minutes showed that policymakers remain focused on bringing inflation down to the Fed's 2% target. The minutes also shed light on where policymakers see rates heading next, with a majority of officials anticipating at least one more hike before year end. However, Fed Chair Kevin Warsh again declined to submit a rate projection, leaving investors to draw their own conclusions about how the Fed's leader sees monetary policy evolving in the fourth quarter. The release also underscored the growing contrast between the committee's outlook and the Trump administration's preference for lower interest rates. Yet, despite pressure from the White House, the unanimous September vote serves as a reminder that rates are ultimately set collectively by the 12-person FOMC, not any single elected official or political party. However, just because the Fed has the final say on monetary policy doesn't mean investors should assume it has the final say on market outcomes. We'd encourage investors not to place too much weight on committee members' stated expectations. Central bankers can and do revise their outlooks as economic conditions evolve. What appears likely today can quickly change tomorrow. And even if policymakers could perfectly predict their own decisions, the Fed's influence has limits. Officials directly controlled the short-term federal funds rate. The longer-term rates for things like mortgages, credit cards and auto loans are driven by the daily decisions of investors, banks and borrowers around the world. Those market forces matter far more than anything said in a policy meeting. That's why we believe long-term investors are better served by focusing on the broader economic and business fundamentals, than hanging on every word from the Federal Reserve.

Finally, Spain's election.

On Monday, Spanish Prime Minister Pedro Sanchez called a snap election after a key housing bill failed in parliament. Spain will now head to the polls on November 29th. The move injects a fresh dose of political uncertainty into one of Europe's largest economies, and immediately sparked debate about what a change in government could mean for markets. At a first glance, investors may see plenty to worry about. Spain's political landscape has become increasingly fragmented in recent years, with the traditional two-party dominance giving way to a more complicated coalition environment. Regardless of who ultimately prevails, gridlock may be the most important outcome. Even the most likely coalitions would bring together parties with meaningful policy differences, making it difficult to enact sweeping legislative changes. It's also worth remembering that even though the election itself is still nearly two months away, markets don't wait until Election Day to evaluate political developments. In the coming weeks, investors will have plenty of time to digest polls and campaign promises. By the end of November, the election story will already most likely be reflected in market prices. The composition of Spain's stock market is another potential buffer against political uncertainty. A large share of the country's equity market is concentrated in multinational financial firms with substantial operations outside of Spain, particularly across Latin America and other international markets. That means their fortunes aren't tied solely to developments in Madrid. As a result, even big political changes don't necessarily translate into comparable changes for Spanish equities. For investors, we think the takeaway is that markets are generally more resilient to political change than headlines suggest. Snap elections always dominate the news cycle because they're unexpected., but the gridlock that often results is typically positive for stocks. With several weeks to go, and a high likelihood of legislative stability ahead, we caution investors against overreacting to Spain's latest political shake up.

That's it for now.

Thanks for tuning in to This Week in Review. If you're looking for more insights, don't miss our other series Three Things You Need to Know This Week, released every Monday. You can also visit FisherInvestments.com any time for our latest thoughts on markets. We'll see you next time. Thanks again for joining us, and don't forget to hit Like and Subscribe.