Key Highlights

● An asset manager cautioned against leaning on election-year seasonality.

● Fundamentals are more important than the election calendar.

● Corporate results drove the October selling.

● Intel warned of cash burn and Amazon posted negative free cash flow.

One asset manager has a word of caution for investors leaning on election-year seasonality: fundamentals "are more important indicators of future returns than the election calendar itself." The firm offered that view even while noting that the fourth quarter of midterm election years has historically been strong for stocks, according to a market report published September 23, 2026.

October 2026 showed why the caveat matters. Seasonal research, including work by one market strategist, suggested October would be a friendly month in a midterm year. Instead, the S&P 500 fell about 71.5 points for the month, closing at 7,580.07 on Friday, October 30, 2026.

The fundamentals that moved markets

The forces behind October's decline were the kind one asset manager described: earnings, cash flow, interest rates and inflation. On Friday the S&P 500 fell 140.32 points, the Dow Jones Industrial Average dropped 572.25 points to 51,770.31 and the Nasdaq Composite lost 747.73 points to 25,437.00, its worst session since June 5.

Corporate results drove the selling. Intel (NASDAQ:INTC) warned of cash burn this year. Amazon (NASDAQ:AMZN) reported trailing 12-month free Cash Flow of negative $42.4 billion, compared with positive $14.8 billion a year earlier, and signaled higher Capital spending next year. Alphabet (NASDAQ:GOOGL)'s free cash flow of negative $9.1 billion badly missed expectations. An Investment strategist said: "The Earnings bar is very high."

A strong economy, a firm Fed

The economic data were robust, which cut both ways. Third-quarter GDP, released Thursday, grew at its fastest pace in a year and beat forecasts. Initial jobless claims came in at 194,000, below the 202,000 expected. The Federal Reserve upgraded its description of growth from "solid" to "strong" in its October statement.

But Inflation stayed stubborn. A market analyst said: "Both headline and core PCE rose to their highest levels since May, underscoring that inflation remains a stubborn issue." The Fed held rates steady on October 28, while futures markets priced in a December hike. Fed Chair Kevin Warsh said: "The Committee will deliver price stability."

Not all the fundamentals were negative. Earnings season has been strong overall. market's October 23 update showed the share of S&P 500 companies beating earnings estimates running above its five-year average, and LSEG data on Friday showed third-quarter earnings on pace for strong growth with more than half the index reported.

That strength was spread across sectors outside technology. Exxon Mobil (NYSE:XOM) posted record refining results, Regeneron (NASDAQ:REGN)'s Revenue of $5.12 billion beat the $4.54 billion forecast, and health care hit a record high on Friday, according to market data. Nine of the 11 sectors gained in October, according to market data.

Politics in perspective

The midterm elections take place on Tuesday, November 3. Democrats are widely predicted to win the House, while the Senate is more in doubt, according to market data. An investment manager said of a Democratic sweep: "I think that will be seen as negative for both the AI names".

Fed Chair Warsh, for his part, said politics was absent from the central bank's deliberations: "politics played no role in the decision."

What to watch

The coming week will test the view that fundamentals rule. Apple (NASDAQ:AAPL) reports Monday, November 2, the election is Tuesday, ISM surveys arrive during the week and the October jobs report is due Friday, November 6. Those releases, along with the Fed's December meeting, are likely to say more about where stocks go next than any seasonal chart.