The Loud Week

Some weeks are quiet. This wasn't one of them.

A national election on Tuesday. A Fed that held rates the week before and made clear that December is still live. A jobs market that has gone from warm to lukewarm in about three months. Inflation still running well above target. Every app on your phone has been buzzing since Monday morning, and every one of those buzzes wanted something from you. A click. A feeling. A trade.

By the time you read this, you already know how the election went. I don't, because I'm writing this before the polls close. And that's sort of the point of this week's Edge.

None of what I'm about to say depends on who won.

Early in my career I spent a long stretch building automated trading systems. Some of the most expensive lessons I ever watched came from the same mistake: somebody decided the model needed to "react to the news."

So we'd wire in a headline feed. The system would read the wire, score the sentiment, and adjust. And it was impressive in demos. On a quiet afternoon it looked brilliant.

Then a big, loud week would come along. Election night. A surprise central bank move. A geopolitical shock. And the news-reactive systems would whip back and forth, buying the first headline, selling the correction, buying the correction of the correction. By Friday they'd paid a fortune in trading costs to end up roughly where they started, minus the fortune.

The systems that survived those weeks were almost boring by comparison. They had rules about what they'd do and when. Rebalance at these thresholds. Add on these dates. Cut risk if this specific measure crosses this specific line. They weren't blind to the world. They just didn't take orders from it.

I didn't fully appreciate it then, but that's the most useful idea I took out of that whole decade. Loud information is rarely actionable. Actionable information is rarely loud.

Think about everything that grabbed your attention this past week. Now sort it into two piles.

Pile one is the stuff you can't control. Who won which seat. What the Fed might do on December 9. Whether the next jobs report is good or bad. What the market does on Wednesday morning.

Pile two is the stuff you can. Whether you use your gift exclusion before December 31. Whether your Separation File exists. Whether your retirement plan is open before year end. Whether your emergency fund covers six months or two.

Here's the asymmetry. Pile one gets about 95 percent of the airtime and almost none of the payoff. Pile two gets almost no airtime and nearly all of the payoff.

That's not an accident. Pile one is built to be loud because loud sells. Fear and outrage hold attention better than calendars do. Nobody's running a cable news segment titled "Reminder: The Annual Gift Exclusion Doesn't Carry Over." But that one sentence will be worth more to a lot of families this year than every election night panel combined.

I'm not going to pretend markets don't care about elections. They do, a little, for a while.

But here's a stat worth sitting with. Going back to 1946, the S&P 500 has been higher twelve months after every single midterm election through 2022, with an average gain of about 14.8 percent, according to a recent breakdown of the data by Dave Manuel. Twenty for twenty. Republican wins, Democratic wins, split Congresses, wave elections, all of it.

Now, I want to be careful here, because this is exactly the kind of stat that gets abused. Twenty data points is a small sample. Some of those gains came from forces that had nothing to do with the election. Some studies that go back further, or use different windows, find exceptions. And midterm years themselves tend to be rough, with deeper average drawdowns before the vote than other years. Nobody should treat this as a guarantee, and I'm not.

The lesson isn't "buy after midterms." The lesson is that the outcome you spent all week worrying about has historically had a lot less to do with your long-term returns than the worry suggested. The thing that mattered more was whether you stayed in your seat.

Let me put a number on it, because feelings are slippery and numbers aren't.

Imagine an investor with 500,000 dollars in a diversified portfolio. Election week feels scary, so they move half to cash "until things settle down." Settling down takes four months, which is about how long it always takes for uncertainty to feel resolved, because it never fully does.

If the market gains 6 percent in those four months, which is not an unusual stretch, that decision cost them about 15,000 dollars. They also likely triggered a capital gains bill on the way out. And then they had to decide when to get back in, which is the harder of the two decisions, and the one most people get wrong.

That's the reaction tax. It's real, it's large, and it's usually paid by smart people who just had a loud week.

The flip side matters too. If that same investor had stuck to a plan that said "rebalance when any holding drifts more than five percentage points from target," and the market had dropped, they would have been buying while everyone else was selling. Identical headlines, opposite outcome. The difference was a rule written on a calm day.

If you've been reading this week, you may have noticed a thread.

Monday's issue was about giving money away well, and it ran on a single date: December 31. Wednesday's issue was about job loss, and it ran on a string of clocks: 21 days, 45 days, 60 days, 31 days, 90 days. Friday's was about retirement plans for owners, and it ran on December 31 again, plus your tax deadline.

None of those issues mentioned who should win an election. None of them needed to. Every one of them was about a date you can see coming and a move you can make before it arrives.

That's what I mean by running the calendar instead of the headlines. A headline asks you to react. A calendar asks you to prepare. One of those makes you money over time. The other mostly makes other people money.

I'm not telling you to ignore the world. You're a citizen and an adult, and some news genuinely should change what you do. The question is how to tell the difference when everything is shouting.

Here's the filter I use. Before I let a headline change anything about my money, it has to pass three questions.

One. Does this change a fact in my plan, or just my mood? A new tax law that changes a deduction I use is a fact. A pundit saying the economy is doomed is a mood. Facts can justify changes. Moods almost never do.

Two. Would I make this same move if I'd read about it a month from now? If the urgency evaporates with time, it was the urgency talking, not the information. Real changes still make sense a month later. Panic moves don't.

Three. Is there a rule I wrote on a calm day that already covers this? If there is, follow the rule. That's what it's for. If there isn't, the right move is usually to write one now, while you're thinking about it, and act on it next time, not this time.

If a piece of news passes all three, act on it. Most won't. In a loud week, almost nothing does.

A few small habits have made my loud weeks a lot quieter. None of them involve willpower, which is good, because I don't have that much.

Turn off price alerts on long-term holdings. If you're not going to sell a fund for 20 years, you don't need your phone telling you it moved 2 percent today. That notification adds stress and subtracts nothing but attention.

Check accounts on a schedule, not on a feeling. Once a month is plenty for most people. Put it on the calendar. When the urge to check hits on a random Tuesday, you can tell yourself the honest truth: "I'll look on the 1st."

Keep a one-page rules sheet. Your target allocation, your rebalancing bands, your emergency fund target, and the handful of dates that matter to you this year. When the world gets loud, read the sheet. It's surprisingly calming to find out you already decided.

Keep a "next 60 days" list. Not news. Dates. The things that are actually on your plate before year end, with a deadline next to each one. That list is the opposite of a news feed. It only contains things you can do something about.

Here's what I'm doing on election night, since I'm writing this a few days before it.

I'm going to watch some of the coverage, because I'm curious like everybody else. Then at about 9pm I'm going to close the laptop and do something I've been putting off for two weeks: start the share transfer to my nephew's account for this year's gift, and fill in the last two rows of my own gift ledger. That will take about 25 minutes.

I'm not going to check futures before bed. I'm not going to check them when I wake up either. I already know what my portfolio is supposed to look like, and I already know the rule that tells me when to touch it. If a holding drifts more than five points from its target, I'll rebalance on the 1st of the month, same as always. If it doesn't, I won't.

Wednesday morning I'll read one good summary of the results, from one source I trust, after I've had coffee. That's it.

I'm telling you this not because my evening is interesting. It isn't. I'm telling you because the most useful thing I can model for you is what boring looks like on a loud night. Boring is a skill. You get better at it with reps. And the reps that count most are the ones on nights exactly like this one, when everyone around you is doing the opposite.

Try it the next time a night gets loud. There's always a next time. Pick one item off your 60-day list and do it while the noise is at its peak. It's a surprisingly good feeling to look up at midnight and realize the only thing that changed in your financial life tonight is the thing you chose to change.

I'll leave you with the idea I keep coming back to.

Most of the money people lose isn't lost in bad years. It's lost in loud weeks, by reasonable people making fast decisions about things they couldn't control, while the things they could control sat untouched on a list somewhere.

The election is over. The next one is already being covered. The Fed meets again in December, and there will be another jobs report, and another earnings season, and another week that feels like the most important week in years.

Let it be loud. You've got a calendar.

Alex Rivera, Wealth Architect at Wealth Grid

This is education, not financial advice. Historical market returns after elections are a small sample and don't predict future results.