Investors are bracing for a Democratic wave on Tuesday. Bracing. Like a man who sees the iceberg and decides to reorganize the deck chairs by sector weighting.
The midterms decide who controls Congress for the rest of Trump's term. Wall Street has opinions. Wall Street always has opinions. Wall Street also had opinions about Pets.com.
Here is the pitch. Divided government means gridlock. Gridlock means fewer new laws. Fewer new laws means stability. Stability means the S&P 500 goes up.
Or down. Or sideways. The chart does not read the news. The chart is a mood ring for people with Bloomberg terminals.
Picture the trade desk. A guy named after a lacrosse position says the market has "priced in" a blue wave. Priced in. By whom? A hundred and fifty thousand people in a Reddit forum with a frog for an avatar?
Retail traders are ready too. They have loaded up on defense stocks, healthcare stocks, and one inverse ETF they cannot pronounce. They bought it because a podcast host with veneers said "rotation." Nobody knows what rotates. Their portfolios, mostly, into the garbage.
I have studied the history of midterm elections and markets. Here is my finding. Stocks went up sometimes. Stocks went down other times. Some of those times, there was an election. I have charted this on a napkin and set the napkin on fire.
Tuesday arrives. Votes get counted. Analysts rewrite their notes in the same font they used for the notes they just deleted.
If you are trading your retirement on a House majority, congratulations. You have found a way to gamble where even the casino feels bad for you.
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