What We're Seeing: Election Jitters – 20 October 2025

The Week in Brief

Late October 2025 saw choppy trading as election uncertainty took hold. The S&P 500 dipped about 1% after shifts in polling and campaign developments sparked policy uncertainty. Investors began to price in the possibility of meaningful changes depending on the outcome.

Elections always inject uncertainty into markets. The range of potential policy outcomes, from taxes to regulation to trade, creates a wider distribution of scenarios than usual. Markets hate uncertainty, and that aversion showed up in price action.

Sector Rotation

Financials and industrials pulled back, reflecting concerns about potential policy changes. These sectors are more sensitive to regulatory and fiscal decisions, making them natural sources of hedging activity.

Quality consumer staples and healthcare stocks held up better. Investors sought out companies with stable demand patterns and less exposure to policy swings. The defensive bid was evident in sector flows.

Fixed Income Rally

Treasuries rallied as stocks slipped, with the 10-year yield falling below 4.0%. The inverse correlation between stocks and bonds reasserted itself, providing diversification benefits for balanced portfolios.

Safe-haven demand was global, with developed market government bonds generally firmer. The dollar was mixed, as uncertainty about US policy cut both ways.

Our Read

Election-related volatility is normal and, to some extent, healthy. Markets are repricing to account for a wider range of outcomes. This is not a crisis; it is a recognition that politics matters.

We do not take strong views on electoral outcomes. Prediction is difficult, and positioning heavily for one scenario exposes portfolios to binary risk. Our approach is to maintain diversified holdings that can weather different environments.

The fundamentals have not changed. Economic growth remains positive, corporate earnings are holding up, and the Fed is easing. These factors will ultimately matter more than short-term political noise.

What Could Change Our View

A decisive outcome that resolves uncertainty quickly would be bullish for risk assets. Markets tend to rally after elections, regardless of which party wins, simply because uncertainty is resolved. Conversely, a contested or unclear outcome would extend the volatility. We are prepared for either scenario.

This is informational commentary, not investment advice.