By Lawrence G. McMillan
We continue to see articles almost daily about the potential negatives in this market – especially in volatility. Yet all these are really doing is identifying overbought conditions. The market can continue to advance for a long time while it is overbought. That’s why Keynes’ statement remains true: the market can remain irrational longer than you can remain solvent. In this case, “irrational” is “going up too long” and solvency applies to short sellers. But you get the idea. A more novel thought might be this: “Has this extended trading range with worsening internals allowed the market to ‘correct’ without $SPX actually going down?” It has happened in the past (1994 comes to mind).
In that vein, it is often the case that the sitting administration attempts to bolster the financial markets if it can, prior to the mid‑term elections. Actually, prior to any election is the broader statement (witness the large drop in interest rates just prior to the 1980 election as an extreme example). To verify this statement as it applies to mid‑term elections, we gathered the results of $SPX for the month of October in each mid‑term election year from 1950 to 2022. The results are interesting and are shown in the Table...
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