“Ethel’s Diamond Post.” / VZD Capital Management, LLC
Dear VZD Capital Friends and Family,
I’m writing to share a newsletter following last week’s market volatility. If you’ve been watching the headlines, listening to commentators, and checking your accounts, you may be feeling anxious about the sharp decline we’ve experienced. To my new clients who joined the firm in 2026, I want you to know that we’re in this together. I review your accounts daily to ensure your financial plan aligns with your goals, objectives, risk comfort, standard of living, and tax situation.
For those in retirement who take monthly withdrawals, I have enough cash on hand to continue your distributions without disrupting my investment management strategy. I’ve been calling clients in alphabetical order by last name and returning calls as they come in, so please know that I’ll call you directly sometime next week.
THE ECONOMY: UNDER NEW CONSTRUCTION
Welcome to another edition of “Ethel’s Diamond Post.” We held off on sending this newsletter as we anxiously awaited the results of the 2026 midterm election. Americans made their voices heard at the polls, with a wave of Democratic candidates winning unprecedented races and turning Congress blue. So, what will this shift in Congress mean for the capital markets?
Historically, Wall Street has paid little attention to which party controls Congress or the White House. Though the election dominated headlines all year, the long-term outlook hinges on corporate earnings, inflation, interest rates, and economic data—not politics. Still, over the past two days, the stock market surged, then plunged just as sharply. Why? Fears that a Blue Wave could delay and disrupt the U.S. AI data center buildout—and that midterm results could bring AI to an immediate halt—have fueled the massive tech sell-off. I doubt that will happen, but once again, we’re in “wait and see” mode.
Yet $2.5 trillion was wiped from the tech-heavy Nasdaq on Thursday as investors rushed to dump tech stocks. The index suffered its worst day since April 2025, when President Trump announced sweeping global tariffs. Thursday’s sell-off hit every major index: the S&P 500 and the Dow Jones also recorded their worst days since April 2025. At the same time, the tech sell-off may offer a rare opportunity, as the sector has underperformed the S&P 500. These bargains could grow increasingly attractive, prompting investors to swoop in and buy. VZD Capital Management, LLC saw attractive long-term bargains with strong fundamentals being thrown out with the bathwater for no apparent reason.
The Nasdaq, heavily weighted toward tech companies, closed in correction territory in March, rallied to record highs in early June, stumbled and nearly returned to correction territory in late July, then set new records in September and October—before falling into correction territory again on Thursday. Market pullbacks can be unsettling, but the right response is simpler than most investors think. Some of the most respected investing greats—John Bogle, Warren Buffett, and Peter Lynch—recommend the same strategy: stay the course. Panic comes at a cost: selling during a market drop is rarely a good idea. Even if your portfolio looks redder than a stoplight, take a deep breath. We’re continuously monitoring the markets and shifting into other sectors to diversify portfolios further.
Given the change in Congress, we are shifting back into gold, healthcare, renewable and clean energy, utilities, environmental companies, consumer staples and discretionary, and fixed-income instruments. We have taken profits throughout the year, but we do not react on a “knee-jerk” basis. That is the purpose of dollar-cost averaging and a reminder that investing is a long-term approach.
So, what does staying the course look like? Don’t panic. Sit tight, watch for rebalancing and rotation, and let others rush for the exits. Selling everything during a market downturn is never a good idea. Imagine if we had lost faith during the inflation scare four years ago. We would have missed significant gains in artificial intelligence companies and other market leaders, which returned more than 50 percent over the last two years. The cash tucked under your mattress hasn’t performed as well as the market. It’s easy to forget how many assets it takes to cover monthly withdrawals, required minimum distributions, unexpected expenses, new cars, and vacations. But compounding can help you maintain your standard of living, prepare for retirement, and sustain your lifestyle through your golden years. Portfolios are designed to meet investors’ changing needs with a mix of short- and long-term investments.
A market downturn is painful, and volatility may still be with us. Yet the best days often follow the worst. We don’t make market calls or claim to have a crystal ball for predicting capital market performance. Historically, the S&P 500 has fallen 10% about once a year, and a 10% to 15% pullback is “par for the course.” Think of it as the price of decades of stock market returns. One of my favorite mottos from a legendary portfolio manager is “emotional reactivity is the enemy of wealth creation.”
At VZD, as mentioned, we sold many partial positions to lock in profits and rotate into other sectors. We’re strategically shifting assets to undervalued companies to ensure your financial plan aligns with your goals, objectives, and risk comfort, so our dollar-cost averaging approach can buy more shares when prices fall. You’ll see these positions as we continue to navigate the uncertainty and as things settle down after the midterm election. I’ve been in the financial arena for over 37 years and have witnessed “the best of times and the worst” in market performance—and we’re still standing. As a fee-based, discretionary advisor, I recognize the trust you’ve placed in me, and my compensation is tied to your success. We’re in this transitional season together, and I have faith in the markets and believe this, too, shall pass.
We’ll call everyone to allow you to ask questions and address any outstanding concerns.
Please feel free to contact me directly by email at ethel@vzdcap.com or by phone at (816) 726-7066.
Thank you for the trust and confidence you have in me and my incredible team.