Follow This Election Investing Playbook – It’s Much Better than Polls and Headlines

[TradeSmith Power Trends logo] [TradeSmith Power Trends logo] October 24, 2024 Follow This Election Investing Playbook – It’s Much Better than Polls and Headlines Feel the Fear and Do it Anyway That’s the title of a book released nearly 40 years ago that has sold more than two million copies. It’s a self-help book, not an investing book. But it’s spot on for investors right now. If you’re worried ahead of the election that is now just 10 days away, you have a lot of company. Most of America, in fact. A survey by LifeStance Health revealed 79% of respondents said they felt election-related anxiety, with more than 20% experiencing “significant” anxiety. In another survey from Forbes Health, more than 60% of people said their mental health has been impacted by the election. It’s concern over who will win and how long it might take to find out the winner. It’s concern over the candidates. It’s the intensity of emotions that can fracture relationships. Then there’s the overwhelming amount and highly charged content from news sources and social media. Underlying all of that is the increasingly critical question of our time: Is what I’m seeing real or fake? Can I trust it? Fear impacts us in many ways, including our ability to make decisions at all much less good decisions. Sometimes we might freeze and do nothing. Other times we panic and decide poorly. That’s certainly true in investing. I learned the hard way that emotion-driven decisions – especially out of fear – are almost always bad decisions. It’s also hard to decide when you can’t trust information. That’s why I took steps to control both. I designed my Quantum Edge stock-picking system 15 years ago, and I know that the millions of data points it pulls and analyzes each day come from trustworthy sources at market-leading data providers. I also wrote the algorithms myself that analyze those data points, so I know the system uses the right data analyzed the right way – based on factors most predictive of future prices. No emotions involved – which is better for both my mental health and my investing success. It’s how I can expect to make money on 70% of my investments, with my winners bigger than my losers. It doesn’t matter how emotionally charged the headlines are. So, let’s set our own emotions aside and look at what that data tells us is highly likely to happen with stocks. I think it will help you feel a little less anxious… and get you thinking about what to do now for future profits. Big Money’s Predictable Pattern Let’s start with the broadest data, which is market seasonality in all years. We’re through August and September – thankfully – which are historically the worst months of the year. We are also just a week away from November, which is the best month in the best quarter of the year. Now, this pattern changes a little in presidential election years like 2024. In non-election years, the end-of-year rally typically ignites in the second half of October. But in election years, the second half of the month is down on average. That’s right on track with what we’re seeing now. Wall Street hates uncertainty more than anything else. (We all do.) And with polling data clear as mud right now, investing based on who you think will win the election is risky – too risky for me. So, what can we base our decisions on? Big Money. The money that moves stocks. The money that accounts for 70% to 90% of daily trading volume. If you know what the biggest investors on the planet are doing, you can make much smarter decisions. And that brings us to the good news: Big Money is highly predictable in election years. It’s a much better investing roadmap than headlines and polls. To uncover this pattern, I researched every election since 1990, and I saw the same thing nearly every time. As I said, the pros hate uncertainty, so it makes sense that they unload some stocks ahead of the election to cautiously lower risk – real or perceived. That money comes flowing back in after the election, or as soon as uncertainty has passed, whichever comes first. In this highly charged campaign, it’s important to note that this pattern held whether a Republican or Democrat won. SPONSORED AD [URGENT: Presidential Election Summit Invitation]( [image]( The day after the presidential election, a quiet D.C. meeting will take place that could plunge markets into extreme volatility… According to an industry insider, [it will become painfully clear to Americans the day after election day…]( [Register Now for Our Urgent “Day After” Election Summit ]( Here’s the Data Let me show you exactly what I’m talking about in a few simple charts. The yellow line is my proprietary Big Money Index (BMI), which measures the inflows and outflows of big money. When that yellow line rises, money is flowing into stocks. When it falls, money is moving out. I then marked Election Day on each chart with a light blue vertical line. The shaded dark blue area is the S&P 500. Here’s the first presidential election in my research -- 1992. You can see that both the S&P 500 and the BMI peaked in the summer before running lower into late October. They quickly rose to new heights after the election, and kept rising through the end of the year. Let’s now look at 2016 when Donald Trump was elected. Big Money again started to lighten up in August, and the S&P 500 declined, though not as dramatically. Then came the sharp reversal in both the BMI and the market. And here’s the last election in 2020, which was an exceptionally unusual time. It started with the pandemic and the Covid crash, which was followed by an absolutely massive rebound. But even with that, the election pattern largely held. Big Money started unloading stocks a little earlier in June, but the S&P 500 continued rising even as the BMI fell. Lighter buying volume can also lower the BMI, even without a significant increase in selling. That’s what happened here, as the market kept rising while the BMI fell. In this case, Big Money accelerated its buying about a month ahead of the election. Stocks pulled back just prior to the actual vote, but they again shot higher afterwards. What This Means for 2024 I find this pattern reassuring – and profitable. There are always additional factors that could cause some zigs and zags, and we might well see more chaos than usual this time right around the election itself. In fact, my friend and legendary investor Louis Navellier is hosting a summit next Tuesday, one week before the election, to talk about potential chaos and what investors can do. He was right earlier this year in saying that President Biden would not be his party’s nominee, so it’s worth listening to. It’s free to attend, and [you can register for the “Day After Summit” here](. The best news of all amid this election anxiety is that we don’t need to be professional fortune tellers or crystal ball readers to make money. In fact, we can use chaos to our advantage to set ourselves up for what looks like a big end-of-year lift that continues well into 2025. Even though we’re all focused on the election, the biggest catalysts for stocks are not the results. Sure, some stocks and sectors will do better than others depending on who ultimately occupies the White House. And yes, I’ll be looking to find those stocks. But more importantly, lower interest rates strongly correlate to higher stock prices. Plus, lower rates make it cheaper for companies to finance growth, which means growing earnings, sales, and share prices. Lower rates also mean that record $6.5 trillion sitting in money market accounts won’t earn as much as it was. The 5% honeymoon period is over, and that return will continue decreasing as the Federal Reserve continues lowering rates. Investors – including Big Money – will be forced to seek better returns elsewhere, and stocks remain the absolute best game in town. We may see some volatility, lots of volatility, or even some crazy volatility in the near term. Nobody can say for sure. But either way, I am extremely confident that Big Money will follow its established pattern and ultimately flow into stocks. The end of the year – and beyond – could be a real heater. So go ahead and feel that election fear, but don’t let it keep you out of high-quality stocks – those with superior fundamentals, strong technicals, and Big Money inflows. The opportunity is too big, and the march higher could start anytime. Talk soon, [Jason Bodner signature] [Jason Bodner signature] Jason Bodner Editor, Jason Bodner’s Power Trends P.S. I know your time is valuable, I hope you’ll clear some time in your schedule next Tuesday to hear what Louis Navellier and others have to say at the “Day After Summitt” about market chaos. Millions of Americans risk getting into trouble if markets whipsaw. I don’t want you to be one of them, which is why we talked about the data today. And this summit can also help. In addition to showing the best way to navigate any chaos, they’ll be sharing a post-election trade – for free – with everyone who attends. It's designed to pay off no matter who wins the election. It’s free to attend. You just need to [click here to reserve your spot now](. © 2024 TradeSmith, LLC. All Rights Reserved. 1125 N. Charles Street, Baltimore, MD 21201 To unsubscribe or change your email preferences, please [click here](. [Terms of use]( | [Privacy Policy](