Welcome back, team. I'm Phil Rosen. With coffee in hand, stock charts pulled up, and "The Wolf of Wall Street" playing at full volume, I'm ready to take us through another week of markets.
With pivotal midterms kicking off this week, it seems fitting to give a nod to elections. But I'm not here to get political — I'm more interested in how this cycle can impact your portfolio.
Let's start with a basic fact: Stocks have gained after every midterm election since World War II. To continue with one more fact: Midterm elections begin tomorrow.
That's what today's edition covers.
But first, a couple other odds and ends for you to sound smarter during your water cooler chats today:
- Tech layoffs are spreading like a bad cold as companies brace for an economic crash
- The housing market won't get more affordable anytime soon
- The Astros won on Saturday, but every time the Phillies have won the World Series, the US has fallen into a recession
Today's newsletter is a doozy. Let's get started.
If this was forwarded to you, sign up here. Download Insider's app here.
1. A fair number of important matters hang in the balance Tuesday, and as of now those outcomes remain steeped in doubt.
But for our purposes, we can turn to history for at least one certainty: Stocks go up in the 12 months after a midterm election, as my colleague Carla Mozée reports.
The S&P 500 is entering this electoral contest in the thick of a bear market, down about 22% from its all-time high. The Fed's aggressive rate hikes have weighed on stocks, and inflation is about as cool as a boiling kettle.
But Ryan Detrick, chief market strategist at Carson Group, still thinks the stage is set for a substantial year-end market rally.
"It's not abnormal to see midterm years struggle early and then see strength late," he told Insider. "Once we can get past the uncertainty of the election … that could just be one more catalyst, one less thing for the market to worry about."
The S&P 500 finished 4% higher in October — the best October ever — and Detrick expects midterms to add to that momentum.
But it's not just the politics that bode well for your portfolio.
Monetary policy history suggests the same, according to Sam Stovall, chief strategist at CFRA. The Fed was in rate-hike mode in the midterm years of 1946, 1958, 1994, and 2018 — and stocks averaged 12.8% gains in the 12 months following.
"If we get a Santa Claus rally, it will be because the market once again is anticipating that the Fed will ease off of the brake and raise rates by 50 basis points in December," Stovall said.
He pointed out, too, that stocks have climbed 84% of the time in the fourth quarter of election years.
How do you expect the stock market to react to the 2022 midterms?
Let me know on Twitter (@philrosenn) or email me (prosen@insider.com).
2. US stocks are ticking higher early Monday as election week begins. Shares of Meta are climbing even as the Facebook parent company, like Twitter and other tech firms, prepares for layoffs. Overseas, meanwhile, China's oil imports hit a five-month high as Beijing issues quotas to prop up the battered economy.
3. Earnings on deck: Activision Blizzard, BioNtech, and TakeTwo, all reporting.
4. Goldman Sachs recommends this batch of names that boasts strong dividend growth and double the yield of the typical stock. Dividend stocks can prove to be resilient picks in times of weak economic growth — and these 24 companies are set to outperform in a recession.
5. BlackRock's investing chief said the central bank is showing that it's willing to overtighten after being too relaxed last year. "The Fed was easy for too long," Rick Rieder said. And to him, it makes no sense with the economy operating in a good place.
6. The US is going to face a deeper recession than Europe. That's according to Bank of America analysts, who highlighted that a searing-hot labor market would force the Fed's hand with aggressive policy. Here's what you want to know.
7. It's possible the stock market crashes 29% if a drop in corporate earnings happens at the same time as a recession. "It takes a lot of bad news to push S&P 500 multiples down to 15x, but this has happened 3x in the last decade," DataTrek analysts wrote in a Friday note. Look out for these warning signs.
8. A housing economist shared estimates of where mortgage rates will be by the end of this year and next. The bad news is, she thinks housing inflation will continue to rise and won't peak until the summer of 2023 — but there's also good news for certain states that are set to see the most price corrections.
9. This is how a CEO picks stocks after spending two decades working at BlackRock and Merrill Lynch. Kevin Rendino leads an activist firm focused on small-cap stocks. He broke down his strategy for finding companies that can double their worth in three years.
10. Tesla stock has declined almost 40% this year, but billionaire Ron Baron said there's still a massive bull case to be made. He told CNBC that he expects the EV-maker will deliver outsized gains that propel the company to a valuation of about $4.5 trillion. That's good for a surge 570% from current levels.
Keep up with the latest markets news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.
Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com
Edited by Max Adams (@maxradams) and Lisa Ryan (@lisarya) in New York.