TRANSCRIPT
History suggests the months following midterm elections have often been favorable for stocks. But does that mean investors should expect another rally? In Episode 168 of **The Cents of Things**, Jeff Kikel and Ron Lang examine historical stock market performance after midterm elections, why Wall Street sometimes welcomes divided government and what investors should actually be watching. Ron shares historical S&P 500 data showing that market pullbacks are normal—even in years when stocks finish higher. He also examines historical post-midterm market performance, including a chart suggesting a potentially strong recovery in the months following an election. Jeff explains why trying to invest based on political outcomes can be a costly mistake. *The takeaway: Don’t trade on politics. Stay diversified and focus on quality investments.* We’re also digging into several encouraging economic reports. • Factory orders increased 1.8% • Job openings climbed to 7.52 million • ADP employment rose by 86,000, beating expectations • Initial jobless claims came in at 189,000 • Manufacturing data showed improvement And we’re watching the upcoming employment report closely. *In this episode:* • What historically happens to stocks after midterm elections • Why market declines are normal • How divided government can influence investor sentiment • Why political predictions rarely make good investment strategies • Could the S&P 500 rally into early next year? • The ongoing challenges facing the housing market • Why mortgage rates are keeping homeowners in place • What manufacturing and employment data tell us • Why the upcoming jobs report matters • Inflation, government spending and the U.S. dollar
and we came back to an election, and that is over. And thank God my phone has stopped getting 16 texts a day from people that aren’t even in my state asking me for money.
So we’re happy. Ron and I have got a lot of good stuff going on today. He’s got a little bit of information on downdrafts in the S&P 500 kind of since
1980. He’s got another piece on the what you typically see after a midterm election. I’ve got a piece on the election and your money, what we should be thinking about and expecting.
And then finally, I’ll go over some economic numbers this week that I think are actually pretty good, and they’re very heartening for the future here. So stay tuned. We’ll be right back on in just one second.
[00:01:00]
Jeff Kikel: Hey, everybody. Welcome to the show. Ron, how are you? Welcome back.
Ron Lang: Good morning. I can actually say this in Arizona, it’s chilly this morning.
Jeff Kikel: Yeah. It was actually- Ron Lang: Chilly yesterday too … it’s Jeff Kikel: not chilly, but it’s that when you walk outside, it just has some crispness to it feel. Yeah. And, I don’t mind it … and not 1000% humidity, which is good.
Ron Lang: Yeah. I was in Boston last week. Wasn’t cold. It was good fall weather. It was nice to see the fall- Yep foliage, Jeff Kikel: Yeah, Ron Lang: perfect timing to go up there right now … I unfortunately don’t experience much of that here. Yeah. But no, it was it was nice. I haven’t been to Boston in a long time.
Jeff Kikel: We yeah, we have fall foliage here in Texas too. It’s, it goes from green to brown, and then it drops off. So that- Yeah … that’s our fall foliage.
Ron Lang: The be- the best part actually was the last 10 minutes of the flight, going to the airport and then seeing everything on the ground and all the different color. ‘Cause,
you know- Oh, yeah … be- staying in the city you see some if there are- [00:02:00] Yep … parks or whatever, but when you’re flying over it was pretty nice.
Jeff Kikel: Yeah. When they make that turn out of Boston Logan over the, over towards the Berkshires and all that’s the most beautiful sight. It’s what makes
me happy and at some point in my life will be there this time of the year every year, Ron Lang: definitely. All right, let’s get started.
So we have to ask if you want to- What, what’s going Jeff Kikel: on in history? Ron Lang: Yeah, so actually I did include some items that were from last week too because
we, Okay … we missed a week. So 1886, the Statue of Liberty- Oh, cool … is dedicated,
and if you’ve never seen a documentary about the history of the Statue of Liberty, specifically
why France gave it to us, how it came over, how they put it together a- and how they did it, over 140 years ago- with the technology that they had is just absolutely amazing.
Jeff Kikel: And it’s… the, the other side of it too is they… I really love the point of it where it was like, “Yeah, we’re gonna give you this thing, but we’re not gonna pay [00:03:00] for the base of it, so you gotta figure it out.” That’s… where to put it.
Ron Lang: But it is, if you haven’t seen, PBS always has something good on it. Jeff Kikel: Yeah.
Ron Lang: It’s really cool. 1922, Howard Carter discovered the Pharaoh Tutankhamun. Yep. And for years after, there be, were so many people that died of mysterious deaths. They always talk about that. Yep. I was always enamored with all that archeology stuff.
Jeff Kikel: The really cool part is if you go and visit what, the, the Downton Abbey, basically, the, his home they actually have a
whole bunch of kind of fake stuff in the basement that’s all that type of stuff,
Ron Lang: yeah. 1926, Harry Houdini dies, and Harry Houdini and his mother were very close his whole life.
And he went around to all the soothsayers and, or and the mediums trying to communicate with her,
and he knew within the first couple of minutes if they were fake, and he spent thousands and thousands- Yep … of dollars trying to find a medium that, to make him talk to his mom. [00:04:00] And this is how he knew that that they were fakes.
Do you know?
Jeff Kikel: I c- oh, I can’t think of it. And in fact, I’ve just been watching a series on this Ron Lang: So this is how he knew that they were all fakes. Because when the medium said,
“Your mom is saying, ‘Harry,” “‘be well. Live your life'”- Yeah … he knew that was a fake- It wasn’t- … because his name was Eric Weiss Yeah, he was…
His name was Eric Jeff Kikel: Weiss. Ron Lang: Yeah. And his mom only called him Eric, never called him Harry. Yep. Anyway.
Jeff Kikel: Yep. No, the cool part- Thank you … is Fox Nation has got a series where they actually took, I think it was one minute… There’s a, there’s
only one minute and 45 seconds of his voice ever in, that was ever recorded, and they took that one minute and 45 seconds, used AI to basically create a whole series on…
it’s really cool. It is- Oh, you’ll have Ron Lang: to send me that link …
Jeff Kikel: it is scary cool because it, he looks so realistic, and he’s basically telling his, the,
his life story in his own voice, which is just super scary, but very cool. [00:05:00]
Ron Lang: 1929, 97 years ago, we had Black Tuesday- Black Tuesday … on the market, and that that didn’t kick it off, but that certainly accelerated it.
Jeff Kikel: It was the start. 1947, Howard Hughes’ Spruce Goose flies. I think it flew a total of, what, a couple miles? That was it. Yep. And I actually wanted to look it up,
but it’s on display in Oregon’s Aerospace Museum. Yep. Why Oregon? I don’t know, ’cause it flew out of Long Beach- ‘Cause- … in California.
And Ron Lang: it- I’m not Jeff Kikel: really sure yeah, it was in a hangar. Yeah, it was in a hangar in Long Beach, and they just finally got tired. It was falling apart, so the guy that
owns Evergreen Aerospace- … which is a big cargo company, bought the plane and moved it to Oregon and basically built a museum around it. It’s, it is the second best airplane museum.
I’m an airplane nut, so it’s the second best airplane museum I’ve ever been to in my life after- Yeah … the US Air Force Museum in Dayton. But yeah,
it’s cool. It you don’t realize how big that plane [00:06:00] is until you walk into there, and there are, like, World War II bombers that fit under one wing.
Like a B-17, they’ve got under one wing of the Spruce Goose. Yeah. It’s huge. Yeah.
Ron Lang: I think it was more of a pet project than a utilization project, but- Oh Jeff Kikel: yeah, it was wildly impractical. It would’ve never worked.
Ron Lang: No and if you ever want to go to another good museum, go to the one down in Tucson.
They, first of all, they have a boneyard there- Yeah … but also they have an SR-71 inside. Oh that, that’s every museum now has got a freaking SR-71. They just handed those things out like water.
I hear you. 1959, Montreal’s Jacques Plante is the first goaltender to wear a mask, and I did look this up-
that I wanted to know wait a minute, how long did it take for everybody to wear a mask?
And it wasn’t until 1974 the last goaltender actually wore a mask, so for another 15 years,
nobody actually believed that it was a good idea. And remember, those masks, all it did was just cover the [00:07:00] face, not the neck- Yeah
not the head, not the ear, nothing. I, it just… and they always thought- You had to- … it was a cheapskate thing- You had to Jeff Kikel: have a lot Ron Lang: of- … if you didn’t wear one.
Jeff Kikel: Yeah, you had to have a lot of really ugly no-teeth guys that were playing goaltender.
Ron Lang: No-teeth, these guys, there’s a, I can’t remember which guy, he literally has 400 stitch marks on his face. It’s nuts. How he didn’t knock out an eye, I have no idea.
Jeff Kikel: Yeah.
Ron Lang: There’s, and actually even back then they were hitting the puck 80, 80-plus miles an hour.
You- Jeff Kikel: Not a slap shot … when you think of, yeah, when you think about professional football players, for a long time they didn’t wear face masks.
They were some ugly… you see those guys back Ron Lang: then- Or if they had a face mask, it was just one bar.
Jeff Kikel: Yeah, one bar Which did nothing. And that was it but that was much later even. In the early days they were just- Ron Lang: Oh, they had the leather Jeff Kikel: helmets … helmets and that was it. Ron Lang: Yeah. Yeah.
That was it. 1960, Lady Chatter- La- Lady Chatterley’s Lover obscenity trial ends.
I can’t get into the whole thing. I was reading part of this. It’s actually- … quite hysterical, like- Yeah … how they thought [00:08:00] that back then it was just basically pornography. Yeah. And today it’s considered pretty tame.
Jeff Kikel: Yeah. Which is scary, but yeah …
Ron Lang: 19- 1962, Khrushchev orders withdrawal of missiles from Cuba, ending the 13 days in crisis. 1964, DC residents cast first presidential
votes- … since 1800. This was very interesting because New York for a period,
and then Philadelphia, were the temporary capitals until- Yep Washington decided on that plot of land where DC was. And then it was
essentially dedicated in 1800, and then they basically said, “If you’re a resident there, you don’t have any- You don’t get a vote … voting rights.” Yeah. But think about
it. For 164 years, if you lived in the DC vicinity, you had no voting rights ever.
Jeff Kikel: Yeah. And then in 1964, for whatever reason, they added the 23rd Amendment, which gave them voting [00:09:00] rights. I- … it’s… I- I never knew this. It was crazy.
I- that’s nuts, yeah. Yeah.
Ron Lang: 1998 John Glenn- Yep … returns to space at the age of 77. My parents are 85 and
can barely get off the couch. I don’t know how, this, this happened. The… obviously, oh, he stayed in pretty good shape, but that’s- Yeah … it’s pretty amazing. All right. So this is
a quick slide. Now we’re past the midterms and, we’re gonna talk about midterm returns over the
next year, … ’cause I, It’s been in my thesis anyway that we were gonna struggle coming into the election, and then from now until the end of next year was gonna be pretty good.
We did stumble into the election. I thought we’d be down more, but- … I think the one
big issue is going to be h- housing. Yeah. People aren’t gonna be moving.
People aren’t gonna be buying. And I think this the housing market is going to remain pretty flat
to [00:10:00] negative for at least another- year or two, especially- Yeah … if they’re gonna keep raising rates. Because obviously the Fed rate isn’t a direct correlation to mortgage rates. It’s really the 20 and the 30 year, but they’re not coming down anytime soon either.
Jeff Kikel: But it ha- it lives on the expectation that, okay, if the Fed’s in a raising cycle, it…
This is set by the bond market, and they’re looking at we’re not gonna let it compress, so we’re gonna keep raising rates along with it.” So I’d… I’m with you. I don’t
really foresee it changing much for the next… it’s been this way since mid 2023,
and I just see it being if you follow that chart, I would- Pretty much guarantee over the next year
it’s gonna be right at about that level, and it’s not gonna change, which is gonna continue to- Yeah affect the housing market. Nobody wants- Yeah … to move if… nobody
wants to go from a 3% mortgage to a 7% mortgage to make that move.
Ron Lang: Nope. So I think combination of this and whatever the new Congress may do in the first year, [00:11:00] because I think what Trump tried to do in his,
his first year of a second term, and just railroad everything through as best as possible, I think the new Congress is gonna try that in year one, too.
But we- Yeah … we shall see. But again, that and a combination of this is gonna be tough. So here are the S&P returns since 1980
with the max declines. So if you just take a look here, every year, for the most part, other than an anomaly of about nine years here there was always some level of decline.
You saw- … in the late ’90s, we never had a… We were never in the red from
the prior year. We were just straight up. … And then obviously you see what happened following the dot com. But if you just take a look here we’ve been up three years of
double-digit gains. We had a better than, what, one-and-a-quarter percent move just yesterday.
Basically- … covering all the losses from the day before, and we’ll have to see. We’re down. We’re a mix. It’s a mixed market today. Actually, we’re down almost one-and-a-half
now. But [00:12:00] it- … it should be very interesting to see not only how we finish the year, how… but how the market digests the election results, and then next year, too.
You know- Yeah … you gotta understand, folks, the market’s up seven out of every 10 years, but we do have declines in a year, which is just a flush out before we get higher. Your thoughts?
Jeff Kikel: Oh, I agree. Yeah, and I think, a- and I’ll cover it in my piece coming up, it, it’s yeah. I don’t care what people say, it’s going to be…
It’s gonna be a mess for the next two years, but very little is gonna get done, and for investors, that’s actually a good thing. It’s a big reason why we saw the market go up yesterday.
Ron Lang: So we had a slide on this a couple of weeks ago, because I was always enamored with the history of it- Yeah … that where are
we typically before the midterm, and then typically, where are we after?
So this is the amount of days. So it’s 126 days, so basically four-plus months before
and- … four-plus months [00:13:00] after. So this is essentially taking us to the end of February of next year, that we could potentially be up 14%. I- it seems a little lofty to me,
but a lot of the other numbers we were looking at 12 months out was an average of 10% since 1950.
Yeah. But overall, the per- the percentages is definitely weighted to the upside.
Jeff Kikel: Yeah, and I think, we saw during the summertime, o- overall, the market’s still up, what, 9%, maybe 10 now with yesterday’s run,
but who knows where it’s gonna be today. I could see that happening over the next few months.
I don’t necessarily know if it’s gonna be m- you know, S&P wise, we had a little mini correction
over the summer with the huge focus on, oh, my God, we’re gonna go after data centers, and nobody’s gonna do this and all that. Y- the reality is that i- it makes me laugh.
The people all that were complaining about data centers are spamming my phone nonstop
with ads and texts and [00:14:00] everything else. Where do you think that comes from? The magical,
mythical, whatever. So yeah, you’re gonna need data centers. Yes, we need to make sure we have that, but I, I think we may see a nice little run-up in those stocks again.
I think it was… it’s gonna be not just necessarily across the board, but I think in very different areas, I think we could see a real good run-up going into let’s say, four months out.
Ron Lang: I agree.
Jeff Kikel: And really Ron Lang: next- All right, what do you got? Jeff Kikel: All right. Let me bring this up, y’all You know, of course, I got a lot of questions
right out of the gate, ’cause, I live in Texas, and we had a big change here in Texas, and, Huge
wanted to kinda share, I think, my thoughts on this. Once again, I’m gonna … i’m not gonna get political. I could care less from a politics standpoint
when it comes to investing. I am here to help my clients and point them in the right direction always. So here’s what I think, and, first off, stocks cheered.
Why did that [00:15:00] happen? The Wall … we changed hands on both sides of the, the Congress. We have a divided government now,
and stocks cheered yesterday. We were up 1,500 points in the S- or on the, the Dow yesterday.
And the real story is gridlock is good. It … When nothing gets done,
and I think the two sides are so far apart at this point, absolutely nothing will get done, and you still have a president that can veto everything, so none of the crazy ideas are gonna get through.
None of the good stuff, unfortunately, is gonna get through either, because they’re gonna be so busy fighting with each other that I think nothing will get done. And usually,
if you look at history, trying to pick, oh if the Democrats win, these stocks will do good, or if the Republicans win, these stocks will do good, almost never has that worked.
So my advice to everybody and my advice that I’m doing in our own portfolios is
don’t trade [00:16:00] on politics. Stay diversified. Make sure you have the diversified portfolio of good, solid companies, and the rest will take care of itself. Good companies will figure out how to make money in any environment.
… I think one of the reasons that the big companies did extraordinarily yesterday is,
you might see regulation, come in or more regulation or something like that come in from Congress, and the big companies have the money to get around it. They’ve got the
money to hire the lawyers to get around it of course, they rallied in that type of situation.
But once again, I don’t think much is gonna get done anyhow. That said, let’s let’s take a look now at The economy,
’cause there’s a couple things I really wanted to cover that I just happened to notice, looking over the economics for the week here. And I’ll blow this up a little bit so you can see it.
Going into the election, we had a couple things this week. I think probably the, [00:17:00] the most interesting on Monday, so let me blow this up here just a bit.
Ron Lang: No, that’s good. We can see it. Jeff Kikel: Okay, good. All right, on Monday we had PMI, and we had ISM Manufacturing Index,
both above, PMI was down just a little bit from where it was prior, but ISM Manufacturing up, which is fantastic.
JOLTS, this I think… a couple things. Factory orders up 1.8%. That was up dramatically from
the prior of .3%. And JOLTS, which is the job openings up 7.52 million,
up from 7.19. So that’s really good things. I think corresponding to that,
yesterday we saw ADP. ADP was up to 86,000 and, that was up.
It was basically equivalent to where it was. They had expected it to be at 63,000,
so that was a way big [00:18:00] beat. Today I think the really interesting thing was initial
claims, and I had heard, going into this, people were thinking it was gonna be up around 200,000.
Came in at 189,000. Continuing claims I think are a little bit higher than where it was, so I think some of this was those prior layoffs that are still hanging in there, but we’ve seen a little bit less layoffs going into this month.
What’s left for the week? The big stuff for this week, non-farm payrolls tomorrow,
unemployment rate, aver- average hourly earnings. Those are higher, or expectations are a little
bit higher. But it’s interesting, the people that are surveyed. So there,
there’s the forecast from briefing.com, and then there’s the consensus of their economists, and the economists are actually coming in at 50,000 on the payrolls, which- They’ve been right lately.
So even though the forecast may be higher, they’ve been right, and it would not surprise [00:19:00]
me if we see that number come in lower than 65,000 tomorrow. I- if it’s more, I think
that’s fantastic. But the reality is I- they’ve been pretty dang right up to this point. Right
Ron Lang: the unemployment’s always the big number the first Friday following, you know- Yeah the month. But, Yeah … for… It’s funny, still, they always considered anything
above 5% or anything, yeah, anything above 5% was full employment. Oh, I’m sorry- Yeah … anything below fall- 5% was full employ- Below 5%, yep … and we’ve been under 5% for what? Five years? Six years?
Jeff Kikel: Forever. Yeah. Ron Lang: Yeah. So yeah, there’s gonna be inflation.
Yeah … until there’s more unemployment and more layoffs and whatever, there’s gonna continue to be more inflation. And obviously we were printing money as if there’s no tomorrow,
so- … and I don’t see that stopping anytime soon, because if they stop printing money without scaling back on other things that will immediately throw us into a recession.
Jeff Kikel: Yeah. Absolutely, and the government’s been once [00:20:00] again, spending money like drunken sailors. Eventually we run out of the ability to do that, and and you’ve
got to actually have some adults in the room. And what I’ve seen out of our Congress, regardless of
whether they’re red or blue, is they’re addicted to spending money, and until that stops, and until
we stop electing people that are addicted to spending money, it’s never gonna change, Ron Lang: once people stop trading in US dollar that may wake some people up- Yeah … but it may be too late at that point.
Jeff Kikel: Yeah, ’cause it goes way too far down the line, Ron Lang: yeah.
Jeff Kikel: And with interest rates as high as they are, the dollar’s still gonna stay pretty solid going forward here for a while, and as long as we’re leading the pack,
our dollar stays strong. So until it doesn’t, and that, we hopefully wise up before that point. But, Yeah. We’ll Ron Lang: know next week …
Jeff Kikel: that said, we’ll have another week of craziness before next week, and we will see you guys back here the next time.
Make sure that you hit that subscribe [00:21:00] button, and be on there, because we will be back every week talking about
this. And hopefully we’ll see a 14% run average before February of next year.