CWS Market Review – November 3, 2026

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Americans are headed off to the polls today. As usual, I’ll skip any politics, but I will note that historically, the mid-term elections have been a good time for the bulls. The low point in the presidential election cycle has historically been right now. Yesterday, the S&P 500 closed at its lowest level since July.

Since 1950, there have been 19 midterm elections, and stocks have gone up the following nine months and 12 months every time. Taking the midterm election day as the starting point, the average 12-month gain in those cycles was +15.1%.

Last week, the Federal Reserve voted to leave interest rates alone. It looks like the Fed is leaning towards a rate hike next month, but we can’t say for certain just yet. One big event will come this Friday: the October jobs report. The last few reports have been unimpressive. Wall Street isn’t expecting much this time. A lousy report could delay the Fed’s rate-hiking plans.

The stock market continues its turn towards defense. This is an important change that investors should understand. After a long time of not doing so well, defensive stocks are suddenly popular.

For example, over the last month, healthcare stocks have done very well compared with the overall market. Since October 5, the S&P 500 ETF (SPY) is -2.6% while the Healthcare ETF (XLV) and Staples ETFs (XLP) are up 9.9% and 9.7% respectively.

Utilities (XLU), another key defensive sector, have also done well with a gain of 8.6%. I’ll caution you—pinpointing the start of a sector rotation is a tricky game, and you see many false positives. In fact, we saw one last summer. Still, this turn toward defensive is notable. For one, these sectors have trailed the market by so much for so long that you should expect some pushback. Also, once the cycle changes, it can last for a few years.

Q3 GDP Grew by 3.4%

The economic news has been surprisingly good. On Thursday, the Commerce Department said that the U.S. economy grew in annualized inflation-adjusted terms of 3.4% for Q3. That’s quite good. Wall Street had been expecting growth of 3.1%. In Q2, the economy grew by 2.2%.

We won’t get the earliest Q4 numbers until late January, but I think there’s a good chance that the U.S. grew by 50% in nominal terms over the last six years. Here are some details from Thursday’s report:

Consumer spending rose 3.8% in the third quarter, the same pace as the prior period. Gross private domestic investment soared 19.4%, driven by a 20.9% surge in equipment spending and an 8.4% jump on intellectual property products.

Real sales to private domestic purchasers, a proxy that Fed officials use for underlying demand, rose 4.9%, compared with a 4.6% increase in the second quarter.

With the GDP numbers, the government also releases the personal consumption expenditures price data which the Fed prefers to follow. For September, PCE prices rose by 0.5% which put the 12-month figures at 3.6%. That was the largest increase since March.

Core PCE was up 0.3% for the month and 3.1% for the last year. In September, consumer spending rose by 0.5% while personal income rose by 0.2%. Despite multiple reports of its imminent death, the U.S. economy continues to grow. I’ve often noticed that good economic news really upsets some people.

Here’s another shocking stat that we recently got: The U.S. poverty rate recently fell to its lowest point on record. According to the Census Bureau, the poverty line for a family of four is $32,649. The median household income ⁠increased 2.6% to $87,460.

It’s not just here but also around the world. The World Bank recently released a fascinating report. Between 2011 and 2023, a staggering 496 million people in India were lifted out of poverty. That averages over 110,000 people every day for 12 years. This is one of the largest declines in poverty on record, yet we rarely hear about this.

By poverty, we mean the Lower Middle-Income poverty line is listed as income of $4.20 per day. The numbers show that 57.7% of people had been living below this line. Now that share is down to 16.1%.

If we look at the extreme poverty line, which is $3 per day, then poverty fell from 27.1% to 2.6%.

What caused the decline? The World Bank said it was “mainly driven by strong consumption growth, rising employment, especially among women, and expanded social transfers, including food subsidies.”

To be sure, there are still vast wage differences in India. The top 10% makes about 13 times those of the bottom 10%, but there are reasons for optimism. Between 2017 and 2023, employment increased by about 134 million. The World Bank estimates that the share of people making less than $4.20 per share will fall from 14.2% now to 12.1 by 2028.

The European Economy Is Struggling

On Friday, Eurostat said that the eurozone economy grew by just 0.4% for Q3. That beat forecasts for growth of 0.2%, but it was less than Q2’s growth of 0.6%.

The German economy grew by 0.2% while Italy and Spain grew by 0.6%. The weak link was France whose economy shrank by 0.1%. The French are dealing “with soaring borrowing costs as investors balk at a political struggle to reduce its large budget deficit and mounting national debt.” Ireland was the big winner at 5.5% growth, but that number can be very volatile.

The eurozone faces many structural issues such as demographics, debt and energy costs. Here’s a look at the S&P 500 (blue) compared with the iShares MSCI Eurozone ETF (EZU).

On Thursday, Binance, which is the world’s largest crypto exchange, said it had been hacked and $6.3 billion in digital coins has gone missing.

On Thursday evening, Binance started to notice some unusual activity and massive withdrawals. The company held a series of emergency meetings. According to the New York Times, one conference call had over 100 boxes. It looks like the hackers had been planning this hack for months.

It’s really an old story just with modern technology. This was a hi-tech version of a bank heist. Binance suspended all withdrawals. This was the largest crypto heist of all time. All the signs are pointing to an elite North Korean hacking unit called TraderTraitor. North Korea doesn’t really have an economy in a traditional sense. Instead, it relies on hacking.

Here’s an hourly price chart of Bitcoin. You can see how sharply the price fell, but it soon stabilized.

To its credit, Binance said it would cover all losses. The company said that it’s already been able to recover some losses. Sadly, this isn’t a new story. Last year, Bybit got hacked for a $1.5 billion loss.

Due to its secretive nature, crypto has often (and quite unfairly) been linked to crime. A few years ago, Binance pleaded guilty to anti-money laundering violations. The company had to fork over $4 billion to regulators, and Binance’s founder was sentenced to four years in prison. He was later pardoned by President Trump.

We’re in a new world where a hack happens, and it will take a while before we learn how much was lost. Binance said it had already replenished 98% of the affected assets.

That’s all for now. The October jobs report will be out Friday morning. Wall Street expects a gain of 55,000 new jobs. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on November 3rd, 2026 at 4:17 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.