In this episode of Glass Half Full, Ryan Detrick, Chief Market Strategist at Carson Group, and Sonu Varghese, Chief Macro Strategist at Carson Group, break down what the midterm elections could mean for the stock market, with just one week to go.
They start with what markets have actually been focused on: the AI wave, a possible rotation, and rising 10-year yields. Sonu explains why oil could be this year’s “October surprise,” with WTI crude at about $101 a barrel and Brent near $115 to $116, up over the last two weeks. Ryan looks at history: over the last 23 midterms, the party that lost the White House gained House seats 20 times, by an average of about 29. Republicans hold one of the smallest House majorities in 140 years and a 52-48 Senate edge, so Democrats need to gain four Senate seats to take control. Prediction markets see a good chance Democrats win the House, and the hosts put their Senate odds at roughly 60% to 70%. They also note that the S&P 500 has risen in each of the last 13 periods of split Congress, and that markets tend to dislike big red or blue waves because they usually mean more spending.
Sonu then explains why the path of least resistance in Washington is more spending no matter who wins, from a defense budget that could grow toward $1.5 trillion to Democratic asks on Medicare and Medicaid. With the deficit near 6% of GDP, that means more debt and potentially higher rates, but also more profits for the private sector in the short term. Ryan reminds listeners that stocks have done well under Obama, Trump 1.0, and Biden, even when many people disliked the president, and that “if it’s obvious, it’s obviously wrong.” They close with a notable stat: the S&P 500 was higher 12 months after all 19 midterm elections since World War II. They also share why they still see a global bull market with life left in it, and encourage listeners to stick to their plan and go vote.
Key Takeaways
- Don’t let politics drive your investment plan. The stock market has done well under Obama, Trump 1.0, and Biden, even when many people disliked the president in office. Big calls about what a party will do to markets have often been wrong.
- A split Congress can be good for stocks. The S&P 500 has gone higher in each of the last 13 split-Congress periods, and markets usually don’t like big red or blue waves because they tend to mean more spending. Democrats are widely expected to take the House, and the Senate looks more competitive.
- Spending is likely to rise either way. Defense funding and Democratic priorities both point to more deficit spending, which is already near 6% of GDP. That’s a source of private sector profits in the short term, but it could keep upward pressure on interest rates.
- History favors patience. Midterm years can be choppy and frustrating, but the S&P 500 was higher 12 months after all 19 midterm elections since World War II. We still see a global bull market with some life left in it, and fundamentals like earnings, profit margins, and the Fed matter more than who wins.
Jump to:
0:00 – Halloween Humor And Midterm Noise
1:10 – Markets Focus On AI And Oil
2:40 – Midterm History And Control Odds
4:50 – Why Gridlock Can Help Stocks
6:10 – Spending Deficits And Rising Rates
8:00 – Ignore Hot Takes Stay Invested
11:00 – Post Midterm Returns And Closing Thoughts
Connect with Ryan:
- LinkedIn: Ryan Detrick
- X: @ryandetrick
Connect with Sonu:
- LinkedIn: Sonu Varghese
- X: @sonusvarghese
The views stated in this podcast are not necessarily the opinion of Cetera Wealth Services, LLC, or CWM, LLC. and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Ryan Detrick and Sonu Varghese are non-registered associates of Cetera Wealth Services LLC.
A diversified portfolio does not assure a profit or protect against loss in a declining market.
Please note: Cetera Wealth Services, LLC is not registered to offer direct investments into commodities or futures. Instead, we provide access to this asset class via mutual funds, exchange-traded funds (ETFs) and the stocks of associated companies. Investments in commodities may be affected by the overall market movements, changes in interest rates and other factors such as weather, disease, embargoes and international economic and political developments. Commodities are volatile investments and should form only a small part of a diversified portfolio. An investment in commodities may not be suitable for all investors.
The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their original value.
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