Market Pulse: The end is here

David Warmond

In a political movement, that’s it. One more good thing. No more attack ads. No more political text. It’s good for our sanity…and good for the market.

Longtime Forbes columnist and asset manager Ken Fisher, a fund manager with more than $100 billion in assets, who appeared on Fox Business, said that, measured from the fourth quarter to the first two quarters, since 1946 , the market has rallied the following year after the midterm elections. Without exception, the gains are substantial from this three-quarter base. Going back 100 years, except for the mid-terms before the Great Depression and World War II, this was indeed the case.

Fisher explained that since the president’s party almost always loses congressional seats in the midterms, nothing will happen for the next two years. So, in the absence of political risk, investors are free to focus on earnings, interest rates, and the economy, the three most important. Unlike the media, investors will see a glass half full as inflation, rising interest rates and a weakening global economy — all well-known negative factors — ease or reverse.

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We can already see that the market is improving. Last month was the Dow’s best October since the mid-1970s, despite the collapse of its big tech stocks (Apple, Intel, Cisco, Microsoft, Salesforce). One reason is that earnings reports show that big incumbents are better able to pass on rising costs than tech companies. Now is a great time to own a parent’s (or grandparent’s) favorite stock.

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My focus is on low risk stocks. These include energy (Kinder Morgan, Williams Corporation, Exxon Mobil), healthcare (Merck, Amgen, Pfizer) and financials (Bank of America). As a group, they’ve fared far better than risk stocks (tech, low-yield), and they will. Capital is now flowing out of tech and into dividend growers as investors trade distant potential profits for real near-term gains and income. Some have also invested in money-market funds and very short-term bonds, whose yields are becoming more attractive.

The market is what it was five months ago. Despite multiple rate hikes, a hawkish Fed speech, a poor inflation report, lowered earnings forecasts, terrible headlines, and more. Why? For the same reason, markets cannot fall day after day.

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One of Wall Street’s favorite sayings is that investors hate uncertainty. But as The Wall Street Journal puts it, what they should hate is certainty. When everyone believes the market will fall, expect an upside surprise.

David Vomund is an independent investment advisor for Incline Village.Information can be found at Or call 775-832-8555. The client holds the positions mentioned in this article. Past performance is no guarantee of future results. Please consult your financial advisor before purchasing any securities.


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