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What Happened in the Market Last Week?
Many people are wondering what specifically caused the market to have its best week of the year last week. Of course, there’s not only ONE reason, but it could be attributed to a combination of the following: 1) The election is behind us, and that’s one less uncertainty for the markets. 2) The perception that Trump will be a business-friendly and market-friendly president. 3) The Fed cutting rates and pumping liquidity into the system, thus creating an equity-friendly environment. 4) The strong seasonality that we normally see from November-January. 5) The strong earnings that continue to come out, as this is a secular bull market powered by the growth in AI.
I think there’s a reason bigger reason called psychology. I underestimated how many people were underinvested, heavily in cash, or aggressively hedged ahead of the election. The reasons they gave included: 1) If Harris wins, the market is going to crash. 2) If Trump wins, the market is going to crash. 3) If the election is not decided by election night, it would lead to a major decline. Therefore, when none of these events occurred, it helped to fuel a “chase” back into the market, as many people were experiencing FOMO (fear of missing out).
For many weeks ahead of the election, I discussed for my Educational Members to not mix your politics with your investing. I even wrote about it publicly in this blog post. For the most part, it doesn’t matter who the president is because the market mainly moves on earnings and interest rates. Earnings are strong and the interest rate picture is favorable. In addition, the major indexes were above their key moving averages (showing continued institutional support), and many of the growth leaders were acting well ahead of the election.
If you did well in the markets last week, congrats! Stay humble, stay focused, keep working hard, and don’t get cocky. The second you think you know it all, the market has a unique way of humbling you. Please keep in mind this is a strong market and we’re not THAT smart. If you struggled, don’t beat yourself up! Always make sure your self-talk is strong. Write down your mistakes and be honest with yourself. If you got too caught up with the emotions of the election, work on making the proper adjustments next time a similar event occurs. Remember, don’t focus on what you THINK the market should be doing, focus on what it is ACTUALLY doing.
I can be reached at: jfahmy@zorcapital.com.
Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained on this blog constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned on this blog. The stocks presented are not to be considered a recommendation to buy any stock. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.
Don’t Mix Your Politics with Your Investing
Prior to the 2016 election, I heard the following phrase about 1,000 times: “If Trump wins, the market is going to crash.” I thought it was such a ridiculous statement that I wrote an article for Yahoo Finance a month before the election saying that he was going to win, and that the market would take off. It was the second most read article on Yahoo Finance that month and I got an INSANE amount of hate for it. The funny thing is I wrote in the article that it was not a political statement. It was simply analysis, but no one cared. Once people saw the title, they were triggered beyond belief (because most people are complete lunatics about politics), and I received over 500 emails in less than 24 hours telling me I’m an idiot.
Well, I’m doing the same thing now. What I’m about to say is not political. It is simply analysis. Over the past two months, I’ve heard the following phrase hundreds of times: “If Harris wins, the market is going to crash.” Again, this is an absolutely ridiculous statement. I don’t know who’s going to win the election, but I do know one thing, the market is NOT going to crash. If you think it is, it’s because you’re probably too wound up in the politics. Like Warren Buffett says, “If you mix your politics with your investing, you’re making a big mistake.”
Why do I think the market is NOT going to crash? Four reasons. 1) The Fed is on the market’s side. They are cutting rates and pumping liquidity into the system. The Fed is WAY more important for the markets than who’s President. Remember, don’t fight the Fed. 2) Seasonality. November and December are traditionally two of the strongest months of the year. 3) Technicals. All the major indexes are above their key moving averages, showing that the big institutions continue to support the market. In addition, many of the market leaders are acting well. Remember, so go the leaders, so goes the market. 4) Gridlock. With a split Congress, very little is likely to get passed.
I know so many people who have pulled their money out of the markets because they’re brainwashed, hate a certain side, and/or are living in fear. Based on what I’m seeing and a lot of the unusual options activity, I think the market finishes the year strong AFTER the election NO MATTER WHO WINS because the uncertainty of the event will be behind us. I apologize in advance for being a voice of reason. If you want to send me hate mail, you’re welcome to do so.
I can be reached at: jfahmy@zorcapital.com.
Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained on this blog constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned on this blog. The stocks presented are not to be considered a recommendation to buy any stock. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.
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