Economic headlines and market fluctuations can make it easy to lose sight of the bigger picture. In this issue of Steady Investor, we examine the trends shaping markets and what they may mean for long-term investors, including:
What the Stunning Results of the Midterm Elections Mean for Stocks – The midterm elections came and went this week, but not without making a huge splash. Democrats flipped at least seven Senate seats and more than two dozen House districts, taking control of both chambers and winning several governorships. Stocks seemed to embrace the results in the first day of trading, but then suffered a wipeout on Thursday that hit Tech stocks the hardest but touched every S&P 500 sector. We would not view the rally or the selloff as a statement on the political setup. Stocks move up or down for many different reasons in the short-term. Looking ahead to the next year, however, there are historical and structural reasons to be optimistic, in our view. Beginning in January, Congress and the White House will be controlled by opposing parties, which makes sweeping new legislation more difficult, reducing the likelihood of major changes in tax and spending policy over the next two years. Historically, legislative gridlock has often been viewed favorably by investors because it can provide businesses with greater policy predictability. The historical results have been clear—from 1928 through 2023, the S&P 500 averaged a 14% price gain in the third year of a presidential term, across administrations of both parties. We see this as a meaningful historical pattern, but for long-term investors, remember it’s still economic growth, corporate earnings, and valuations that will matter more than which party controls Washington.1
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U.S. National Debt Reaches 100% of GDP – The new Congress may have a laundry list of policy objectives to address, but one of them should arguably be the U.S. national debt, which just reached a significant milestone. At the end of fiscal 2026, federal debt held by the public totaled $32.2 trillion, equivalent to approximately 100% of the country’s annual economic output. The ratio is approaching the historical peak of 106% reached in 1946, following World War II. As recently as 2000, the debt-to-GDP ratio stood at just 33.7%.3
Federal Debt Held by the Public as a Percent of U.S. GDP

Source: Federal Reserve Bank of St. Louis4
The milestone comes despite continued economic growth. The federal government recorded a budget deficit of nearly $2 trillion in fiscal 2026, equivalent to 6.2% of GDP.3 The U.S. has tended only to run deficits this large during recessions, wars, or other national emergencies. The U.S. is engaged in the war with Iran, but beyond that, economic growth has been solid—which is generally a time you’d want to see smaller deficits or surpluses. Looking ahead, rising interest costs are poised to present a growing challenge. As existing government debt matures and is refinanced at higher rates, interest payments consume a larger share of federal resources. This can crowd out other spending and private investment, which can dent growth over time. For investors, the 100% threshold does not necessarily signal an immediate fiscal crisis, but the longer-term trajectory deserves attention. Sustained borrowing can put upward pressure on Treasury yields and limit the government’s flexibility to respond to future economic challenges.
Jobs and Inflation Data May Force the Fed’s Hand – Let’s start with recent October jobs data.
According to the Bureau of Labor Statistics, the U.S. labor market showed renewed strength in October, with employers adding 165,000 jobs, well above economists’ expectations of 59,000. The unemployment rate also declined to 4.1%, while revisions to August and September figures added another 84,000 jobs. Over the past three months, the economy has averaged 137,000 new jobs per month, suggesting hiring has regained momentum following a midyear slowdown.
A separate report from payroll processor ADP also exceeded expectations, showing 86,000 private-sector jobs added in October versus forecasts of 75,000. Though the two reports use different methodologies, both point to stronger-than-anticipated hiring. Solid hiring and sticky inflation may seal the Fed’s fate for the December meeting. The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose 3.6% year-over-year in September, up from 3.4% in August. Core inflation, which excludes food and energy, reached 3.1%. Consumer spending increased 0.5% for the month but was essentially flat after adjusting for inflation, suggesting higher prices are absorbing much of the increase in household spending. In our view, stronger employment and persistent inflation likely force the Fed’s hand in maintaining restrictive monetary policy, with another rate increase likely in December.5
Put Market Moves in Perspective – With the midterm elections behind us, investors are looking ahead to what comes next for markets. Keeping a long-term perspective can help you assess shifting headlines and recognize potential opportunities amid uncertainty.
Our free guide, Using Market Volatility to Your Advantage2, explores the potential benefits of market turbulence and lessons from history. Discover:
Take a more informed approach to market uncertainty. Download your free copy today!
Disclosure