What happens when the stock market falls? Why the best and worst days come together

Five minutes a week that makes you smarter and calmer about your own money — plus a look at what I’m actually doing with mine…

If you checked your pension last Wednesday, you’d have felt clever. If you checked it again on Thursday, you’d have felt sick.

On Wednesday, the day after America’s midterm elections, the Dow Jones had its best day in nineteen months. On Thursday it had its worst.

If you didn’t look at all, you missed both. By last night the S&P 500 was back almost exactly where it was on election day.

So this week’s letter is about why the best and worst days turn up together, and why the investors who do best are often the ones who weren’t watching.

Since the Friday before the election the S&P 500 is down 0.4%. The equal-weight S&P 500, where every company counts the same, is up 1.2%. The Russell 2000, America’s small companies, is up 1.1%.

So for the third week running, the average companies have done better than the giants. This is exactly what we positioned the advanced parts of our portfolio for — growth above and beyond the core S&P 500 holding.

This is our A-Team moment: I love it when a plan comes together…

See our portfolios here

What happened

The Democrats won both the House and the Senate. From January, President Trump will struggle to get anything through Congress, and markets like a government that can’t do much. Oil fell 8% on Wednesday too, on bets that a Democratic Congress will bring the Iran war to an end sooner.

On Thursday about $3 trillion came off American shares in a day. The Democrats had won in Texas and Georgia, where people are turning against the giant data centres being built for AI, and investors took fright that the AI building boom will slow.

So on Wednesday the market decided the election was good news, and on Thursday it decided the same election was bad news!

Here, the Bank of England put interest rates up on Thursday, for the first time in more than three years. On a £250,000 tracker mortgage, that’s about £37 a month more.

What I think it means

Thursday was the AI worry of the last few weeks, only louder. The giants at the top of the index are spending fortunes on AI, and any doubt about whether it will pay off hits them first. The rest of the index isn’t carrying that problem. On Thursday the index fell 4.4%, but the average company in it only fell 2.9%.

That is the shift I set our portfolios up for: less reliance on the few giants at the top.

Every position I hold, and why, is on my portfolio page.

What’s coming up

Today at 1:30pm: America’s inflation figures for October. A high number makes a Fed interest rate rise in December more likely.

You’ve probably heard that missing the market’s best days is expensive. Here’s how expensive, and why it’s so easy to do.

J.P. Morgan looked at $10,000 put into the S&P 500 at the start of 2006 and left alone, with the dividends reinvested, until the end of 2025. It grew to $80,619.

Miss the ten best days in those twenty years — just ten days out of about five thousand — and it grew to $35,866. Less than half as much!

The part people leave out is where those best days were. Six of the ten best came within two weeks of the ten worst.

That’s because the market swings hardest when everyone is frightened, and it swings both ways. In April last year, Trump’s tariffs knocked more than 10% off the S&P 500 in two days. Three trading days later it had its best day since 2008, up 9.5%. Anyone who sold in fright missed it.

Last week was a small version of the same thing, with the good day first, followed by the bad day on Thursday. Then yesterday the S&P 500 had its best day since April.

You can’t tell in advance which days will be the good ones. The only way to be sure of catching them is to sit through the bad ones as well, and that’s a lot easier if you aren’t checking every day.

Many of you are paying a financial adviser, and wondering whether you should be…

If that’s you, I do an hour on Zoom for exactly that. We go through your last statement together and find everything you’re paying, and what it’s costing your future wealth.

Then I show you how I manage my own investments and why it’s simpler than anyone in the industry wants you to believe. By the end you’ll know whether leaving is right for you, and if it is, what to do first.

If it isn’t, you’ll know that too and can stop worrying about it.

It’s £250, one-off, which is less than a month’s adviser fees on a £250,000 pot. There’s nothing to buy at the end of it, and if you finish the hour still not knowing what to do, I’ll give you the £250 back.

If you want one, click here to email me and I’ll send you the details.

If you joined this month: I’m a UK investor who fired his financial adviser and has run his own ISAs and SIPP ever since, doing much better than they ever did. If last week’s headlines made you nervous about starting, the case is the same as it always was. A low-cost S&P 500 tracker, bought regularly and left alone, will do better than most financial advisers. To learn more, start here.

Every position I hold, and why, is on my portfolio page.

See you next week.

Tim

MarketBeat analysts just updated their 10 Best Stocks to Own for Fall 2026 report. The list includes AI growth names, a high-yield dividend payer, a steady portfolio diversifier and companies positioned for continued growth into year-end. Get all 10 stocks and the research behind them for free now.

See the 10 Stocks

I am not a financial adviser. Nothing here is personal financial advice. Please do your own research before making any investment decisions.