Connect with us

Hi, what are you looking for?


US stocks rally ahead of the midterm elections. Is it safe to buy?

US stocks are off their lows, as reflected by the major indices. For example, the S&P 500 index is up more than 300 points from its October lows – and rising.

The bulk of the rally started last Friday. An article published by Nick Timiraos in the Wall Street Journal suggested that the Fed will discuss if it is suitable to lower the pace of the rate hikes from 75bp to 50bp.

“I think the time is now to start talking about stepping down. The time is now to start planning for stepping down,” said San Francisco Fed President Mary Daly during a talk at the University of California, Berkeley on Friday.

— Nick Timiraos (@NickTimiraos) October 22, 2022

While still tightening financial conditions, the Fed signals a slowdown, and thus, stocks rallied.

But besides the Fed’s decisions regarding the funds rate, another event has historically affected US stocks’ volatility. Midterm elections are due in the first half of November, and stocks have historically rallied after.

However, both bulls and bears have something to argue related to the midterm elections.

Most investors are short on US equities

A recent survey run by the Bank of America shows that most investors are short US equities. While it may look bearish, extreme positioning has often lead to major short squeezes in the market.

Moreover, there is plenty of cash available to buy, as shown in the graph below.

With the Fed in hiking mode, markets may have difficulties rallying

As mentioned earlier, historically, stocks rallied after midterms. But that was not the case when the Fed is in hiking mode.

This is why, perhaps, the Fed’s message from last Friday that it is preparing to discuss the slowdown in the rate hikes is important. If the market perceives that the Fed nears the terminal rate of this hiking cycle, and given the extreme positioning, then we might be in for a massive rally in the next couple of months.

The post US stocks rally ahead of the midterm elections. Is it safe to buy? appeared first on Invezz.

Enter Your Information Below To Receive Free Trading Ideas, Latest News And Articles.

    Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

    You May Also Like


    Solana (SOL/USD) is enormously underrated as a cryptocurrency project, even with its hiccups – including the latest exploit on one of the ecosystem apps....

    Editor's Pick

    The new eSIM infrastructure will help modernise the IoT connectivity market with fast, secure connections and reduced vendor lock-in. 1oT, a tech startup from...


    The latest Job Openings and Labor Turnover Survey from the Bureau of Labor Statistics shows the total number of job openings in the economy...


    U.S. District Court Judge Reed O’Connor recently ruled to uphold the rights of employers granted in the Religious Freedom Restoration Act, rather than uphold...

    Disclaimer:, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2023