The Dow surged to another all-time high overnight, up 122 points or 0.46%. Oil held onto previous strong gains and remains at four year highs. If history is any guide, it could be a strong finish to the year.
‘…this October has the potential to be a strong one thanks to the coming midterm election, as midterm years have been historically quite strong for the stock market and the month of October specifically, according to senior market strategist Ryan Detrick for LPL Financial.
‘The S&P 500 has gained 3.3% on average in October during a midterm year, ranking as the best-performing month even ahead of the usually bullish November and December, Detrick observes in a note today. “Incredibly, since 1982, the scary month of October has seen stocks fall only once during a midterm year,” he explains. “Not to mention it has been the best month overall going clear back to 1950 for all midterm years.”’
History has yet to deal with mid-term elections when Donald Trump is President, so things might not go according to plan. But so far, the market has not concerned itself with the increasingly dire state of US politics.
The nomination of Brett Kavanagh to the Supreme Court is a case in point. The Democrats are desperate to stop the nomination, as it would give conservatives on the court a majority vote.
On the surface, the argument is that Kavanagh will help overturn the 1973 landmark case known as Roe V Wade, which established a woman’s legal right to an abortion.
But under extensive Senate questioning, Kavanagh said that law was now firmly established and that he supported it.
The Democrats real fear is that a Trump nomination and Supreme Court majority is the final step needed to reveal and prosecute treasonous activities that occurred during the Obama administration.
Remember, Trump has already called for the declassification of material relating to claims that his team colluded with the Russians to influence the 2016 election. If this were really the case, why would he want to make declassified material, as well as text and email communication between key FBI investigators, public?
He knows the information would likely reveal collusion between government agencies and the Democrats, in an attempt to frame a sitting US President. This could be the biggest scandal in US political history. It’s just that the mainstream media isn’t reporting on it because they are implicated too. They worked with the government agencies to create the ‘Russian collusion’ narrative!
And there’s also the Uranium One issue that must be making the Democrats nervous. Investigative reporter, John Solomon, has the story as per The Hill:
‘Eight years after its informant uncovered criminal wrongdoing inside Russia’s nuclear industry, the FBI has identified 37 pages of documents that might reveal what agents told the Obama administration, then-Secretary of State Hillary Clinton and others about the controversial Uranium One deal.
‘There’s just one problem: The FBI claims it must keep the memos secret from the public.’
That’s the same FBI that has refused to release information related to the Russia investigation. But now Trump has ordered it, it will only be a matter of time.
What implications does this have for the Aussie market?
All this is background as to why Brett Kavanagh’s name has been dragged through the mud. There has been plenty of allegations, but all, so far, uncorroborated. And while you won’t read about this in the MSM, Kavanagh’s accuser, Dr Ford, has deep ties to the CIA. This is another ‘deep state’ government agency that the Trump administration is trying to rid of corruption. You can check that out here.
As I said, the market hasn’t shown too much concern about the low state of US politics, or the potential fireworks that will occur when Kavanagh takes his seat on the Supreme Court (the Senate will likely approve his appointment this week).
Is it correct in this assessment, or just blissfully ignorant? We’ll find out soon enough. The mid-term elections are just one month away.
In the meantime, Aussie stocks aren’t joining the bull market party. The ASX 200 fell a hefty 0.75% yesterday and futures indicate only modest gains are on the cards for today.
The financial sector is the main culprit. It fell 1.12% yesterday. The Royal Commission has exposed some deeply flawed practices and inflicted a huge amount of brand damage.
As you can see in the chart below, the ASX 200 Financials Index looks set to test the June low. If it finds support above here and rallies again, it potentially suggests the worst might be over for the sector.
Let’s wait and see…
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The bottom line is this: While Aussie stocks looks shaky, I think there’s little risk of a major fall while US markets continue to make new highs. And with interest rates remaining low (the RBA kept rates on hold yesterday), it’s my view that stocks still represent a better long-term bet than cash or bonds at this point.
Editor, Crisis & Opportunity
PS: If you want to lay down a little money on the hottest corner of the ASX right now…but you don’t know your way around the small-cap sector…this report is for you. Get access now (free).