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This Is What Stocks Do After an Election

Tomorrow is a big day…

Tuesday, November 5.

And you know how critically important it is.

It’s Guy Fawkes Day, of course!

I know you’ve been looking forward to launching your fireworks and throwing a Guy Fawkes effigy onto a bonfire.

But wait…

I feel like I’m forgetting something.

Hmmm… what was it again?

Ah, yes.

We also have a Presidential Election in America.

I’m joking, of course.

You can’t escape the election. The news coverage has been suffocating.

I make light of it to make a point though.

No matter how the election goes – or how long it takes to count the votes and litigate the outcome in the courts – this, too, shall pass.

That doesn’t mean that over the short-term, things won’t get hairy. Best be prepared.

That’s what I’m going to help you do today…

Stomach Churning Volatility

As regular readers will know, I expect stomach churning volatility in the stock market to begin this Wednesday – the day after Election Day.

Investors hate uncertainty. And there’s nothing more uncertain than a muddled – and perhaps even violent – transfer of political power.

It’s not just the election that will set investors on edge.

The Fed is meeting on Wednesday.

It will decide whether to cut rates… and by how much.

This will add even more uncertainty into the mix.

That’s why Wall Street legend Louis Navellier and I put out a special pre-election broadcast last week. It’s called The Day-After Summit.

We looked at why stock market volatility will spike.

And we revealed the trading strategy we’ll be using to not only survive the market turbulence that’s on its way… but also profit from it.

So, if you haven’t yet caught up on that, make sure to catch the replay here while it’s still online.

Today is your last day to place the pre-election trade Louis and I discussed. And you really should do so because it’s gone up after every U.S. presidential election in modern history between the dates that we laid out during our broadcast. We believe it will pay out this year as well.

Today, I’ll show you the evidence…

Predictable Pattern

Writing at TradeSmith Daily, Freeport Society friend Lucas Downey crunched the numbers for every election from 1988 to 2020.

Here’s what he found…

• Two weeks following the election, the S&P 500 was down by close to 1%. The tech-heavy Nasdaq 100 was down by an average of 2.2%.
• Two months after the election, the S&P 500 was up 2.4%. The Nasdaq 100 was up 1.4%
• Twelve months following the election, the S&P 500 was up by an average of 15.3%… and the Nasdaq 100 by 17.6%.

Of course, averages are averages. The scale of the moves after an election can be a lot higher or a lot lower. So, let’s not fixate on the exact numbers and look at the broader pattern instead.

The stock market tends to be lower immediately following an election and sharply higher within the following year.

This trend holds when Democratic and Republicans win the White House.

So, don’t sell good stocks backed by strong, durable trends because of election-related volatility.

History shows that’s a bad idea.

That said, you can’t take advantage of any post-election volatility if you’re already fully invested.

To buy the dips, you need to have cash on hand.

So, use today and tomorrow to give your portfolio a good, hard look. Ask yourself the following questions…

• Do you have any dogs in there you’ve been thinking about selling?
• Do you have positions that have grown to be a disproportionately large percentage of your portfolio that you could trim a little?
• Do you have some stocks that you bought ages ago for reasons you can’t remember anymore?

Consider selling some of these stocks in your portfolio to raise extra cash.

You don’t have to go nuts.

Boosting your cash levels to 10% or 20% of your portfolio will give you enough to take advantage of the coming volatility..

As Louis and I detailed during last week’s pre-election summit, that kind of market mayhem can be tough for long-term investors. But for folks with shorter time horizons, it’s an opportunity to make 12 months of gains in a matter of weeks.

And we’re already seeing rising volatility…

It’s Already Happening

The election may not be until tomorrow, but volatility is already picking up.

The CBOE Volatility Index (VIX) (aka the “fear gauge”) measures investors’ expectations of volatility – aka swings in stocks – over the next 30 days.

It goes up, as investors get more fearful about market mayhem.

As you can see in the chart below, since the end of September, the VIX is about 50%.

It’s nearly doubled off its July low.

How high does the VIX spike if the election result is inconclusive tomorrow night?

We’ll know soon enough. But I feel a lot more comfortable going into this knowing I have plenty of cash to buy the dips.

The next few days will test our mettle as Americans… and as investors. But we’ll get through this with the right strategy.

To life, liberty, and the pursuit of wealth,

P.S. The more investors panic as the election results roll in tomorrow… the more surprises… the crazier and more out of whack the markets get. That’s exactly when agile investors and traders can step in and profit. The choice is now yours…

Will you sit on the sidelines and watch the rest of us ride the wave of volatility that’s inbound?

Or will you take control and leverage the strategy Louis and I share with you in The Day-After Summit?

Watch the replay here and act before you run out of time.