NASDAQ Jumps 7% in 2 Days on Divided Congress

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NASDAQ Jumps 7% in 2 Days on Divided Congress

The U.S. presidential election remains undecided. But the global stock market does not seem to care. In fact, stocks seem overjoyed – the S&P 500 (SPY) and NASDAQ 100 (QQQ) delivered a huge 2-day rally that ranks as one of the best in post election history.

  • The NASDAQ 100 jumped 7% in the last two days.
  • The S&P 500 is up 4% in the last two days.

The big jump has US stocks trading back at the all-time high – with both indices up solid this year despite major challenges. Take a look at the 2020 chart below. The top line is the NASDAQ 100, the bottom line is the S&P 500.

Investors are happy to see the big surge. However, many are confused. Why are stocks surging so much when the winner of the U.S. presidential election hasn’t even been called? Here’s the answer.

The reason stocks are surging is because Congress will remain split – the Republicans will retain control of the Senate and Democrats will retain control of the House.

This is close to an ideal outcome for the stock market for two reasons.

  • If Trump wins, its business as usual like we have seen for the last four years with steady economic growth and positive upward momentum for stocks.
  • If Biden wins, stocks believe the split congress would stifle the potential for increased regulations and tax changes.

CNBC published some good analysis on this dynamic if anyone wants to take a look.
Here’s why the stock market is rallying even though the election outcome is still uncertain
Either way, this price movement tells me stocks are comfortable with a Trump or a Biden presidency.

What Should We Expect Moving Forward?

This big jump we have seen in the last two days is a very bullish signal from the stock market. It tells me stocks are no longer worried about the election – it’s one less thing stocks need to worry about.

COVID still remains a head wind for economic growth and stock gains. However, as I have been saying, stocks don’t fear COVID the way they did back in March of 2020 when the pandemic and quarantine first hit. So even if we see bad news on COVID I don’t expect another stock meltdown like we saw in March.

Looking forward, the period from November through April are historically the best six months of the year for the stock market. This should be another strong catalyst for the stock market in the next few months.

Here is the Plan

My plan is to be aggressive. That means deploying cash into stocks and always looking to buy low on bouts of weakness.

Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.

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