Posted in
Newsletter
By: Tom Gentile
on September 25th, 2024
Does the Rate Cut Help One Presidential Candidate Over the Other?
ℹ️ This article was previously published in our newsletter. Subscribe for early access!
The Federal Open Market Committee went big with their rate cut today by making its first interest rate cut in 4 years by half a basis point.
We are coming up on the Presidential election very soon and one concern for Americans is the state of the economy. Are things better now than they were 4 years ago is what people are weighing and in answering that they may end up deciding who they will vote for.
This isn’t an educational piece where I am going to try and sway you one way or another nor am I trying to open up dialogue discussing who should win as I like to focus on options trading and not be too political, if at all. But who becomes President does have an effect on the markets and I have to be aware of that when it comes to my options trading.
Does the rate cut help Trump? Some believe the cut is necessary and there should be more to come. Note that in July Trump promised there will be a “lot of cutting” from the Fed should he take office. For today some in the GOP feel they could have done 25-basis points now and 25 after the election. They wonder why they decided to go so big right now, which seems they feel the Fed may be conspiring against them.
Does it help Harris? VP Harris has been pretty mum on the issue. Some experts feel it may help perceptions of her. Harris has stated she welcomes the cut, but she is staying focused on lowering prices.
My contention is there are sectors and stocks in those sectors that will flourish no matter WHO wins the election. Regardless of what party wins there are sectors that have done well post the election and I will bring that education to you in the coming weeks and also pinpoint which stocks in those sectors have proven they trade higher regardless of which party is in control of the country.
To your success,
— Tom Gentile
Market in Focus – GLD vs UUP
GLD is my representative for gold an UUP is what I use for the US Dollar.
Zero-yield bullion tends to be a preferred investment amid lower interest rates, which a 50-basis point cut today constitutes lower rates.
Tools and Observations
As stated earlier on the front page of the newsletter I have or I am compiling data that will show which sectors of the market have performed well post Presidential elections in the past.
I plan on showing the success of those sectors and then go further into analyzing which of those stocks in those sectors post the election have done well.
One starting point for you all to know about is a website called www.sectorspdrs.com.
You can see all 11 of the SPDR Sector ETF’s.
You can get the holdings of all secruities in each, the definition of the ETF and price performance on a dollar and percentage basis for the day, months or years.
The markets popped initially on the Fed announcement to cut by 50-basis points. By the end of the day of trade prices reversed and as you can see all but one SPDR Sector ETF closed lower on the day.
The only positive ETF on the day was the XLE – Energy.
The martkets are going to digest this interest rate cut and assess what it means for the markets going forward.
We will see if there is a further slide to come or if this is enough of a good sign of the Fed’s belief in the economic situation right now which spurs confidence of investors and more buying of equities pushing them higher.
I point out again that I will bring that data of sectors and stocks in those that move higher despite the election results in the coming weeks. Keep an eye out for that and keep working your system rules for your options trading in the meant time.
To your success,
— Tom Gentile
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Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
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