JPMorgan has weighed in on the midterms. Three outcomes. Blue wave, Republicans hold, split Congress. The bank has assigned each a different market implication. This is called covering the board.
Picture the meeting. Highly paid strategists in a glass tower. Someone says, "What if the thing happens, or the other thing, or the middle thing?" Everyone nods. Bonuses are approved.
The headline says history shows elections are positive for stocks. Fine. History also shows the sun comes up. Nobody books a conference call about it.
Here is what the retail trader hears. "Elections are good for stocks." He buys calls Monday morning. He sizes the position like a man who has never met a Tuesday. By Wednesday, the Congress he predicted is not the Congress he got, and he is explaining to his wife why the Roth IRA now holds a lottery ticket.
Three scenarios. One of them will happen. JPMorgan will then announce it saw that coming, the way a weatherman claims credit for rain after predicting sun, rain, or clouds.
The chart does not care who controls the House. The chart cares about support, resistance, and whether you are sitting on your hands. Congress will gridlock, as is tradition. The 200-day moving average will not return its calls either.
Voters wait in line for hours to choose a party. Traders wait in line for hours to choose a strike price. Both groups leave feeling powerful. Both groups are wrong about their influence.
Vote if you must. Then close the brokerage app, because a split Congress cannot fix a portfolio built on a podcast.
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