The U.S. Economy is too big to be meaningfully impacted by the mid-terms. 
However, we do see an increased possibility of a year-end rally regardless of mid-term results.
Why?
Because markets don’t like uncertainty and mid-term results, regardless of what they are, will remove the uncertainty of what happens in DC for the next 2-years. Equities often do well after midterms, because gridlock is often the case and it inhibits policy change that could scare stocks.
We believer the focus will increasingly shift to the economy. Inflation will remain elevated and a recession will hit (if you don’t think it’s already here). The Fed may pause interest rate hikes at year end or in Q1 2023. But the damage will continue to ripple through the economy and markets.
The politics of inflation is at the forefront of Fed thinking. Investors who think we’re going back to free money and pre-pandemic excess will be sorely disappointed.
Plan accordingly.
The unknown this time around is how will rising interest rates play into any gridlock.
The Fed is expected to hit markets with a 75 basis point (3/4%) hike in November and another 50-75 basis point (1/2-3/4%) hike in December.
We are increasingly cautious about the prospect for stocks and are using rallies to lighten exposure to the broader financial markets by redeploying assets into more concentrated portfolios.
The bigger problem than midterms, for stocks, is the increasing possibility of an economic downturn.
Let’s just call it a recession even though that term is no longer politically correct.
Let’s remember the old saying, “It’s a recession when your neighbor loses their job. It’s a depression when you lose your job.”
Mortgage rates punched through 7% and the slide in real estate has begun.
The only question is straight from Limbo Rock, “How low can you go?”
There’s always a bull market somewhere.
The question is simply where?
… and how nimble are you?
You want to skate to “where the puck is going to be.” You want to be positioned for the next move in those areas that are unaffected, or actually enhanced by the bear market.
That’s why it’s called, “The Battle for Stock Market Profits.”
We are bullish on America … just not last year’s bullish themes.
Keep moving.
The information contained in this Higgins Capital communication is provided for information purposes and is not a solicitation or offer to buy or sell any securities or related financial instruments in any jurisdiction. Past performance does not guarantee future results.
#fiduciary #financialadvisor #higginscapital #income #retirement #wealthmanager
Ray Higgins
San Diego