Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Should You Sell Your Stocks Before Tuesday’s Big Elections?

Stock-Markets / Stock Markets 2018 Nov 03, 2018 - 03:24 PM GMT

By: Stephen_McBride

Stock-Markets

Are you prepared for Tuesday?

It’s going to be a crucial day for the stock market.

As you likely know from the lawn signs dotting American neighborhoods, midterm elections take place this Tuesday.

If the polls are correct, President Trump and Republicans are in big trouble…


According to statistical analysis firm FiveThirtyEight, there’s an 85% chance Democrats will seize control of the House of Representatives from Republicans.

This is causing bigtime anxiety for investors who’ve enjoyed the 28% stock market rally since Trump took office.

No matter what you think of Trump, his reign as president has been great for stocks. But as the election has drawn closer, the market has fallen apart.

Yesterday the S&P 500 closed out October for a 7% monthly drop—nearly its worst month since the financial crisis!

I’m going to tell you exactly how to be invested ahead of Tuesday’s big elections.

But before I continue, a warning…

Few topics stir emotion in America like politics. Many perfectly reasonable people lose the ability to think straight when they hear the name “Trump.”

Politics and investing do not mix. Superinvestor Warren Buffet often says “If you mix politics and investing, you’re making a big mistake.”

So let’s steer clear of opinion and emotion. Instead, I want to focus solely on the facts that are relevant to you as an investor.

As you’ll see, you don’t need to waste even one second worrying about which party will win on Tuesday.

My team went back and studied every midterm election since the Second World War.

I was surprised by what we found.

It turns out there’s a shockingly easy way to predict whether stocks will rise or fall after a midterm election. And it has nothing to do with predicting in advance which party will win.

Here’s what we found…

Since 1946, there have been 18 midterm elections.

US stocks have climbed higher in the next 12 months after every single one.

Every single one.

That’s 18 for 18!

I’ll repeat it because this is so important:

For each of the past 18 midterms, stocks have ALWAYS climbed higher a year later.

Always.

We’ve had every possible political combination in the past 72 years. Republican president with Democratic Congress. Democratic president with Republican Congress. Republican president and Congress. Democratic president and Congress.

The market climbed higher every time.

And stocks don’t just grind higher after a midterm election. They often surge…

Since 1946, stocks have jumped an average of 17% in the year after a midterm.

And if you measure from the yearly midterm lows, the results are even better. From their lows, stocks jumped an average of 32% over the next 12 months.

For perspective, that’s more than double the average performance for stocks in all years.

We’re also entering the third year of a presidential term, which is historically the strongest year for stocks.

Take a look at this chart. You can see that the performance of stocks in the third year of a presidential term beats all other years by a long shot:

The facts are clear… but why do markets behave this way with such remarkable consistency?

Glance up at the chart above once more and you’ll notice the second year of the presidential cycle is typically the worst for stocks.

That’s the year we’re in right now—the year when midterms occur.

There’s one last important point you should know. Leading up to midterms, US stocks typically perform poorly. From January to October in midterm years, they drop an average of roughly 1%.

In all other years stocks rise roughly 7% in that timeframe.

Think of midterm elections like a thick fog covering markets. They obscure what the political situation will look like in the near future.

Unable to see what’s coming, investors get nervous and act cautiously. Just as they would slow down while driving a car through a thick fog.

Once the election concludes and the fog clears, investors regain confidence and the market gets back on track.

2018 is following this script to a T. For all the market’s gyrations in the past few weeks, the S&P is roughly flat year to date. If we stay on script, we should expect the market to surge in November after the uncertainty of the elections is behind us.

Knowing all this, now is your chance to take advantage of the market’s pre-election jitters.

If you’ve been reading the RiskHedge Report, you know I practice “disruption investing.” I identify and invest in companies that are disrupting industries and inventing the future. Often, these stocks can hand us big gains of 3x, 4x, 5x our money or more.

This stock market pullback is our chance to get in on great disruptive businesses at much cheaper prices than we could a few weeks ago.

Today I want to highlight your opportunity to buy Google (GOOG) at a great price. I’ve called Google one of the “ultimate disruptors,” because it’s like an octopus with tentacles in many disruptive sectors.

As you surely know, Google has an effective monopoly on the internet search market. For every 100 searches performed, 92 of them flow through Google. And this year it’ll earn over $100 billion from selling internet ads on its search pages.

But this is only scratching the surface. Google also owns YouTube, which my research shows could be a $150 billion company on its own.

It also owns Waymo, the world’s leading self-driving car company. As I explained recently, it will launch a fully driverless ride-sharing service in Arizona later this year.

Underneath it all, Google is super-profitable. In the latest quarter it increased its net profit margin to 27.2%. Meaning for every $100 in sales, it can reinvest $27 into growing its disruptive businesses.

A few weeks ago, I recommended you wait to buy Google until it pulled back to near $1,050/share. Today we have our chance. As I type it’s trading for about $1,070/share – close enough for me to pull the trigger.

I’m buying Google here and I plan to hold for at least two years.

That’s all for today. What do you think… Are you worried about the stock market pullback? Or do you see it as an opportunity? Write me at stephen@riskhedge.com.

Stephen McBride
Chief Analyst, RiskHedge

By Stephen McBride

http://www.riskhedge.com

© 2018 Copyright Stephen McBride - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in