We Feel It Too, but Most Stocks Actually Held Up

The Nasdaq Composite fell about 1% on Monday. That followed Friday's drop and a rough October. If you own AI-linked tech stocks, it may have felt like more of the same. We invest our own savings and retirement money right alongside yours.

But across the S&P 500's large-, mid-, and small-cap indexes, more than twice as many stocks rose as fell. So far, the selling has hit one corner of the market.

In his October Quarterly Call, Motley Fool co-founder and CEO Tom Gardner pushed back on the idea that big, sudden moves show the most conviction. "I would argue that the best form of conviction is the step-by-step incremental moves where you have to rethink your thesis as you buy a stock or rethink your reasons for selling a stock in your portfolio," he said. That takes discipline when prices swing. Below, we share two habits that can help. But first, a reminder...

Tech Fell, Most Stocks Didn't

Monday's tech selling had familiar roots. Oracle (NYSE:ORCL) fell almost 9% after filing to raise $20 billion in stock and debt for its AI build-out. Marvell Technology (NASDAQ:MRVL) agreed to buy Lumentum (NASDAQ:LITE) in a $115 billion all-stock deal. Marvell shares dropped about 13%, and Lumentum fell nearly 19%. Both moves revived last week's doubts about whether all that AI spending will pay for itself.

The Nasdaq-100 fell 1.4%, and the technology sector lost nearly 3%. Energy fell about 4% as oil dropped more than 7% on signs of U.S.-Iran diplomacy.

Almost everywhere else, the day looked good. The Dow rose 0.4%, and eight of the 11 S&P 500 sectors gained. Only three fell: energy, technology, and healthcare, which slipped just 0.15%. Across the S&P 500, MidCap 400, SmallCap 600, and Nasdaq-100, 1,027 stocks rose, while 473 fell.

The regular S&P 500, which gives the biggest companies the most weight, fell 0.5%. An equal-weight version, which counts each company the same, rose 0.8%. So the typical company had a good day, and a handful of giants dragged the headline number down.

As we noted Friday, 10 companies make up 39% of the S&P 500's value. Their moves can swamp what the other 490 are doing.

Tech's pullback may not be over. But if you own a diversified portfolio, most of your stocks probably had a perfectly fine Monday. When you own businesses across many industries, gains in some can offset a rough day in others, as they did on Monday. When we launched our 50-stock Epic Portfolio in April, TMF Chief Investment Officer Andy Cross put it this way: "Fifty stocks provide a massive buffer against volatility."

Election Day Is Not a Trading Signal

Whatever your politics, you may feel tempted to trade on today's midterm results. History says it's rarely worth it.

In October, The Motley Fool studied every midterm election since 1874. The S&P 500 rose in the 12 months after 32 of 38 midterms. Its average total return in those years was 14%, versus 11% for any 12-month stretch.

Who won didn't matter much, either. Returns had little link to how many seats the president's party lost or which party ran Washington afterward. The few bad years had other causes, such as the Panic of 1907 and the Great Depression.

Averages aren't promises, of course. The month after a midterm has often been quiet. And 2026 brings its own worries: AI spending, high valuations, and a possible Fed rate hike.

None of this means stocks will rise because of the election. Over time, the businesses you own have mattered far more than who won. Leave portfolio decisions for a calmer day.

Two Habits for Weeks Like These

Friday's article covered buying in thirds, owning at least 50 stocks, sleep numbers, and cash. Here are two more ideas from our recent report, AI Concentration Calls for Cash and Calm.

1. Stress-test the balance sheet

Monday's selling was about financing. That makes this a good week to check whether your companies can pay their own way.

In our October Stock Advisor recommendation reveal, Team Rule Breakers' Toby Bordelon suggested four questions to ask any business. They matter most for smaller companies that rely on outside financing:

1. "Can you continue to do what you've been doing?"
2. "Can you expand at that pace?"
3. "Do you have the resources to do that?"
4. "Is your cash flow matching your expenses?"

Then imagine the AI trend cools, and ask, "What else do you have beyond AI that you can keep going?" For some companies, Toby warned, "the idea of them dying actually is something you need to consider."

Heavy spending isn't always a red flag. A giant with little debt can keep it up far longer than a smaller company that borrows. If your holdings pass these questions, a falling share price is much less worrying.

2. Add up; don't double down

When part of your portfolio is down, it's natural to buy more of the losers. TMF co-founder David Gardner calls that "throwing good money after bad." His alternative is the second habit of a Rule Breaker investor: "add up, don't double down" and put new savings into the businesses already proving you right.

"Most of our returns are probably gonna come from a few companies," Toby said. "And when we find those, let 'em [run]."

A falling stock can still be a good buy, but let the business make the case. Before adding to any position, ask whether the company is still delivering on the reasons you bought it.

Foolish Final Thoughts

The headlines have been red for several days now, but most businesses kept doing what they do. Before the week is out, try running your largest holdings through Toby's four questions. The answers will tell you far more about those companies than a day's stock price.

Tom Gardner has positions in Marvell Technology. The Motley Fool has positions in and recommends Lumentum, Marvell Technology, and Oracle. The Motley Fool has a disclosure policy.