Last Wednesday’s euphoric post-midterm election market surge, which was the second biggest post-election rally since 1982…
… is now history, with the S&P virtually unchanged, and the Nasdaq now below last week’s post election ignition point.
Which, paradoxically, is what Trump “predicted” two weeks ago when the president said that the market would drop if democrats won the election. In retrospect, it appears he may have been right.
And on Monday morning, perhaps because the jetlagged president appears to be bored with nothing scheduled on his calendar, moments ago he proposed another theory, this time blaming the market’s “headache” on the prospect of Trump being “harassed” by democrats.
What is notable, is that in capital markets history going back to 1901, stocks have returned more when the government is divided than when it’s unified following midterm elections, so if indeed stocks close the year red from here, it would be truly a historic first.
While it is debatable that Trump’s transparent gambit to halt Democratic probes into his administration by appealing to American 401(k) will work, he probably is correct overall, and as subpoenas, lawsuits and official inquiries pile up, it is only a matter of time before the market – which for the past 2 years learned to ignore all domestic political news and developments and just kept grinding higher – will be quickly, violently and painfully reacquainted with the same gravity which it ignored for so long.
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