Post-midterm results support 2H rally... plus, if Republicans take Senate, even stronger Energy gains (despite conventional wisdom)

We are sending out the First Word Tuesday evening in lieu of Wednesday Morning due to Midterm Elections

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Equities have been mostly rising for the past 18 trading sessions following the abrupt reversal on the very "hot" Sept CPI (Oct 13). And markets are at an important crossroads this week -- this week has two events with major implications for financial markets and the economy.

  • Our overall takeaway is that the highest probable outcomes for the two events (Tues eve midterms - Republicans likely take Senate, and Thu October CPI - Core CPI likely comes below Street's 0.5%) will support markets stronger into YE. Possibly by a wide margin:
While the final midterm results may not be known for several weeks, betting markets (538 and others) favor Republicans taking both the House and Senate.If such a scenario emerges, we see inflationary pressures in the US falling for two reasons. First, future fiscal restraint means less inflationary spending. Second, we think Republicans will push back against the "climate change" agenda, and possibly support fossil fuel extension. And this means the "future oil risk premia" declines. Hence, less in...
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