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Finally Over...


The outcome of the Mid-term elections came as expected with the Democrats retaking the House and the GOP hanging onto the Senate with an expanded majority. The country is now even more deeply divided than after Trump’s unexpected victory in 2016 but the production of a gridlock scenario did not scare equity markets even if in theory it should make the adoption of legislative initiatives more difficult for the executive. Still, D. Trump avoided the disaster and markets welcomed this outcome which also dimmed risks of more outsized US deficit financing. Stocks gyrated, hesitated a little, then pushed through the door of least resistance with positioning light and perhaps too cautious after one month of a dreadful October that stood up to its reputation. No dialing back is sight either for the tax cuts or the deregulation agenda that delivered the “sugar high” to the US economy and equity markets… up until October. There are facts, lies and statistics and the statistics are that 8 of the past 8 mid term elections were followed by a meaningful rally, gridlock or not. More importantly, going into the opening, the major indices blew through their 200dMa which, baring a meaningful reversal, was unlikely to be threatened again yesterday. This forced more CTA’s and trend followers to change their posture, triggering an avalanche of buying that fed onto itself until the last second of trading yesterday, leaving all sectors in the green to the tune of 2% without much differentiation. Even the battered energy sector rallied despite oil falling another -0.9%... Even the other battered real estate sector rallied despite bond markets taking another hit. Mid-term elections are finally over. Perhaps the equity correction as well, until nest time… 

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