Play the Game

Last week, I took my son, Henry, to Seattle to watch a Seahawks game for his birthday. It was a matchup filled with storylines. Patrick Mahomes and the NFL's number-one offense against Seattle's dominant defense. Kenneth Walker, last year's Super Bowl MVP for the Seahawks, returning to Seattle in a Chiefs uniform. And an undefeated Kansas City team hoping to keep its perfect season alive.

I was more than a little nervous. I didn’t want to go all the way up to Seattle to watch the Hawks lose. BUT THEY WON 20–3! Go Hawks! Hoping for the same result against the Bears tonight.

There's an old saying in sports: "That's why they play the game." No matter how talented the players, how convincing the statistics, or how confident the predictions, nobody actually knows the outcome until the game is played.

Which brings me to the stock market.

No matter how great the stock market's record, how convincing the economy looks (good or bad), or how confident the election predictions (red or blue), no one knows what will happen to stocks until the final numbers are on the scoreboard.

Stocks have had a good run: four straight years of double-digit growth. We've only seen that happen twice, during the '90s tech boom and the Great Depression. So, aren't we due for a pullback? I've had this thought every year for the last several years, then stocks go higher.

In 2023, we had the most anticipated recession of all time. We stayed invested, and the S&P 500 returned 26%. In 2024, interest rates were high as a result of inflation, and housing, among other areas, was struggling. We stayed invested, and the market returned 25%. In 2025, we had a new president and a new tariff policy that caught everyone off guard. We stayed invested and actually bought near the lows. The market returned 18% last year. This year, the talk of a bubble has been nonstop as AI spending is off the charts. The market is up 10%. (Returns according to Morningstar)

This is why we play the game! This is why we stay invested! This is why I make portfolios, not predictions!

Elections

Now, we have midterm elections tomorrow. We could see a referendum on data centers and the AI world in general. A blue wave could mean a slowdown in how many data centers will be built. This is important because data centers and AI spending account for over half the growth in the economy this year, according to this First Trust article.

Some experts say that if 200 data centers are slated to be built in our country, a blue wave would mean only 150 get done. That'll put a dent in the economy, and the nervousness is playing itself out in the stock market. Just last week, we saw some of the companies at the forefront of the AI buildout take big hits in their stock prices, which sent the whole stock market down.

Needless to say, the results on Tuesday night will be reflected in stocks on Wednesday and beyond. A blue wave could be bad for stocks in the short term, especially around technology and AI. A red wave could be a boost to stocks. Something in the middle, like Democratic control of the House and Republican control of the Senate, could keep the status quo.

One positive side note: After midterm elections, stocks are almost always positive. JP Morgan wrote an article Oct 7th stating stocks return 15% on average in the 12 months after midterm elections, no matter who won or lost.

So, what do we do? We play the game! Because you never know how things will end up, and they've always worked out well for our investors over the long term.

Expectations

One additional note about expectations: As good as the last four years have been, this can present a problem. The better the record, the higher (and potentially more unreasonable) the expectations. And when expectations are too high, even good results aren’t good enough.

We’re experiencing this right now in our portfolio. Some of our best-performing stocks just released quarterly results that were good, but not good enough. Expectations were too high for Fortinet and Alphabet. Those stocks were down big, but we still love the companies and bought more of them.

We investors (myself included) need to be wary of expectations that are too high as well. Winning is nice, but it’s not normal to go this long without a down year. On average, stocks go up three out of every four years, so history tells us another down year is inevitable; it just doesn't tell us when.

Although we’re glad to have participated in the last several years of growth, we need to continue to brace for some down days and potentially a down year. This is why we don't get overly aggressive. A down year will show up eventually. They always do. And when one does, we won’t be caught unprepared like the poor Chiefs. This is why we stay diversified.

We will have our defense ready so that when the pullback comes, not everything in the portfolio will suffer. Bonds and money market funds should hold up well in a pullback.

We'll also have our offense ready. Ready to take advantage of the pullback and buy stocks or stock funds at lower prices so we can all benefit when the market goes back up again.

This is why we play the game! This is why we invest! Because over the long term, we've always been rewarded.

Summer

So much happened this summer. We had our interns/finance bros, Tom and Palmer, in the office a ton. They helped us with quite a bit: setting up lunches with the garage door open, setting up a new website, and other projects like sealing the parking lot. Tom is here full-time, thankfully, and we hope to have Palmer back after his MBA program in the spring.

Jeremiah and I headed to Sunriver, OR, with our families to support the Oregon Trial Lawyers Association, which we manage money for. It was great to see some of our clients there and to be able to give a great report to the association on the accounts we’ve managed for 10 years.

SMB also fed an army of 90 McNary High School football boys on my son’s team.

While it was a great summer, it’s kind of nice to see the rain again. And we’d love to see all of you again as well! Please let us know if you need anything at all or if you'd like to stop by.

Thanks for reading,

Tim Porter, CFP^®