Hope you are all doing well. The S&P 500 finished more than 1% higher, and the NASDAQ added nearly 2% as the indexes recorded their second positive week in a row. The Dow closed at 53,055.90 on Monday, a new record level. The index couldn’t maintain positive momentum, as it fell on Tuesday and Wednesday and finished 0.5% lower for the week. The S&P 500 is just a half percentage point below a record that it set on June 2, and the NASDAQ was more than 3% below the record it set on the same date. If you have money invested in the market that you know you will spend before the end of the year, this would be a good time to sell. The market may get choppy over the next few months before likely rallying at the end of the year. Lindsey Graham passed away this weekend. I have broken down this week’s update using some of the Senator’s memorable quotes.
Well, thank God for a media that will ask questions. — Lindsey Graham
The media loves to scrutinize everything we do here in the States but is mute on China. The world and the media let China get away with unfair practices. Global economic interdependence and China’s massive market size make pushing back highly complex and costly. Over the past few decades, China has utilized a state-directed approach—including heavy industrial subsidies, intellectual property coercion, and restricted market access—to build dominant positions in global supply chains. Shein is the perfect example of this, selling designer knockoffs for a fraction of the cost. This week Shein got a quasi-win when a French court awarded Lacoste damages of €110,000 ($125,741) following a dispute over the sale of items with the Lacoste crocodile logo on the Shein platform. That’s a slap on the pinky, not even on the wrist for stealing a globally recognizable brand logo.
Elections have consequences. — Lindsey Graham
Over the last 100 years, midterm election years have historically exhibited a distinct pattern: sluggish performance and high volatility through the summer, followed by a strong rally in the fourth quarter. Historically, the stock market posts an average correction of roughly 15% to 18% at some point before the November elections, as uncertainty over shifting political power and policy gridlock peaks. Going back to 1896, the Dow Jones Industrial Average has posted an average return of just +1.2% from May 1 through Halloween in midterm election years. With the market near an all-time high again, if you have to replenish cash and safe assets for spending that will take place this year, now is a good time to do it. If you aren’t spending the money, stay invested. The year following the midterm elections is usually excellent for stocks. Over the 12 months following a midterm election, the S&P 500 has historically delivered an average return of roughly 12.4% to 16.3%. This robust post-election rally is historically one of the strongest forward-return periods. Equities typically experience a strong rebound, driven by the relief of knowing the political landscape and resolving policy uncertainty. Going back to the 1950s, the S&P 500 has posted positive returns in every single 12-month period following a midterm election. There is no reason to believe this time will be any different. So even if the market drops in the short term, stay invested as this bull market likely has another leg higher.
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