The market pop following the mid-term elections was certainly exciting with the Dow gaining more than 500 points (2%+), the S&P gaining nearly 60 (2.12%) and the Nasdaq gaining 194.80 (2.64%), but be VERY careful as we continue through November.
 

The Positives

The market hates uncertainty, so even though the Democrats took back the House (typically, Republicans are better for the markets), the stock market popped just having the knowledge in place.

In addition, the market historically performs better when there’s gridlock in the government. If government can’t change things, traders and investors can focus on the companies without influence from regulation changes and other craziness.

Plus, as we head into the end of the year, many hedge funds and financial institutions may force the market higher in an effort to make up losses from October’s sell-off.
 

The Headwinds

However – and this is a big “HOWEVER” – there are a lot of headwinds facing the overall market right now:

• Although Trump’s been tweeting big guns about an agreement with China, most analysts and political pundits don’t think there’s a chance of that happening at the G20 summit later in November. Even though you might think this news is already baked into the markets, any negative news following G20 with China will likely slam the markets.
 
• Good news is bad news as strong economic signs reinforce the Federal Reserve Bank’s intentions to raise interest rates as many as three times next year – and that’s following December’s hike. Great news for economic development, to be certain, but high interest rates beat up the market as it is harder for companies to borrow money to grow at speeds investors are used to.
 

Conservative Investment Strategy

Avoid buying right now. Rather than putting money to work, look at lightening up on positions where you’re overweight or taking profits as we pop into year-end.

The 2019 outlook is murky right now – I’ve heard as many analysts say we’re going to continue higher as I’ve heard say we’re going to head lower.

The first quarter is a notoriously negative time-period, so it might be wise to keep your powder dry (or dry up some powder, if that’s a thing) as we head into the end of this year and wait until 2019 to put any new money to work.
 

Thoughts?

As always, we’d love to hear what you think. If you’ve got thoughts about what to do as we head into the end of 2018 or where you think the market will head in 2019, feel free to share them in the comments!