Will There Be a Market Rally Next Week?

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Unleash Prosperity Hotline – Weekend Edition
Issue #651
11/04/2022, 11/05/2022, 11/06/2022
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1) Will There Be A Market Rally Next Week?

That’s the question we’ve been asked every day for the last several weeks.

No one, even Warren Buffett, can ever predict very well the direction of the stock market in the short term (in the long term it always goes up), but we do have a few interesting data points to show you.

First, we think it is more likely that the results will be a bigger red wave than many pollsters have been predicting. (See latest betting lines below.)

Assuming the Republicans win the House and Senate (which betting markets think is probable) we have two recent historical precedents to go by in predicting the Wall Street response. These were the red wave elections of 1994 and 2010. The ‘94 wave was unusual in that almost no one expected the tidal wave that came in. So the market had not fully anticipated the Republican control of the House.

Here is what happened to the markets. Boom! The immediate reversal of course and the beginning of one of the great bull markets of all time 1995-2000.

Figure 1

GOP Bull Market: Dow Jones Industrial Average

(monthly, semi-log, November 1994 through November 2000)

Both the stock and bond markets responded positively to the news.

In 2010 the pollsters and the markets did predict a big win for the GOP - though not nearly as large as the earthquake we did see with historic GOP gains from coast to coast. You can see the stock market, which had been climbing for two years after the 2008 collapse, didn’t hyper-accelerate, but it did continue its bull market ascent.

Figure 2

GOP Bull Market: 10-Year Treasury Bonds

(monthly, November 1992 through November 2000)

We will refrain from making any stock market predictions because the economy and business profits are facing such stiff headwinds right now. But we do feel reasonably confident in saying that a surprise on Tuesday in the Republican direction will be much more bullish than a surprise in the direction of the incumbent democrats - which could launch a real sell-off.

2) Latest Betting Lines on Election Are Seeing Red All Over

We've made the point several times that betting markets on elections are more predictive than polls - in part because betting markets take into account all relevant information - not just polling results.

The latest odds set by online sportsbook Bovada are pointing to a Republican wave. Republicans are overwhelmingly favored to win the House. Oddsmakers have them at -1400 (meaning you’d have to bet $1,400 to win $100). The odds of The GOP winning both the House and Senate majorities are now greater than to one in favor.

3) The AOC Of Texas Is In Danger Of Losing To A Latina Republican

One of the biggest stories of this year’s midterm elections has been the shift among Hispanic voters in places like South Florida and Texas toward the Republican Party.

But a more impressive gauge of the GOP’s new strength may come in Harris County, Texas, which includes Houston and has 4.7 million people - 44 percent of whom are Hispanic.

Progressive Lina Hidalgo won election in 2020 as the county's chief executive in 2018. She promptly hiked spending, eliminated almost all case bail (which led to a surge in crime) and became one of the biggest COVID lockdown queens in the country. She imposed and enforced a $1,000 fine for those failing to wear masks.

If Ms. Mealer ousts Ms. Hidalgo, it will be a powerful indication that Hispanics aren’t buying the woke agenda.
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4) Jobs Lost or Gained in October

You decide

Employer survey 261,000 jobs gained

Household survey 328,000 jobs lost

We don’t know which one is accurate, but the average of the two is NEGATIVE.

Oh. And labor force participation of working-age adults FELL from its already pathetically low level.

5) Keep an Eye Out for These Upset Specials on Tuesday

Here are some races that aren't on people's radar screen, but should be:

Minnesota could turn red. Keith Ellison could lose his re-election bid in Minnesota for attorney general and Scott Jensen could topple lockdown artist Tim Walz in the governor's race.

We think Tiffany Smiley of Washington can beat Patti Murray the incumbent who is generally considered the dumbest member of the Senste - which is saying a lot!

We think our CTUP member and supply-sider Bob Stefanowski has a shot at being elected the first GOP governor of Connecticut in many years.

Keep an eye on Indiana's First congressional district -- heavily union, never been repped by a Republican. The GOP candidate is Jennifer-Ruth Green. She's running ads featuring blacks explaining why they are voting Republican this time "because the Democrats have never done anything for me or my community." She has the potential to be a national leader and game-changer.

Then there are three deep blue states that could elect a Repub governor. First, Oregon is likely to go red in the race for gov.

Second, Lee Zeldin could break the Democratic stranglehold on New York, with coattails that could extend to flipping the erstwhile Louise Slaughter seat in Rochester with police chief La'Ron Singletary. This would be a political sonic boom. Zeldin’s biggest problem is that so many hundreds of thousands of conservatives have abandoned the state.There aren’t enough to make this upset probable.

And while we’re pretty sure the Illinois governor’s race is out of reach for Darren Bailey, what was looking like a bit certainly caught our attention that President Biden is in Chicago campaign for JB Pritzker - which should help Bailey further close the gap by Tuesday.
6) Congrats, Houston!

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