how to buy stocks online | STOCKS WILL GO DOWN AFTER THE NOVEMBER ELECTION

That title is really a prediction of what I think is most likely going to happen and I am writing this exactly one week before the November midterm elections. You can see why I think the stock market is steadily going up prior to the vote (see November elections and the stock market) and I think once it is over, it will be like a full balloon with nothing left to do but to let some air out.

This run up before the election is taking place somewhat because people are expecting Republicans to make major gains in Congress. That would be viewed as positive for stocks as Republicans are thought to be more pro business than Democrats. People are buying stocks now because they are excited about the vote and what it might mean for the future.

This November election is EXACTLY the same as the earnings announcements for companies. Often times we see a companies stocks go up in front of earnings because of the high expectations people are feeling. We just saw that with Apple stock last week and we are seeing the whole market go up now before this election.

Unfortunately, heavily anticipated company earnings are often followed by the price of the stock going down, even if the earnings were good. This is because the reality of the earnings never quite live up to the fantasy of what people hope for.

Will this November election be any different?

I don’t think so and that is why I think the stock market will go down in the days following. Of course, if Republicans absolutely blow away all predictions and take a majority in both houses, then the stock market may rally. My guess is though, that Republicans will make good gains but nothing that is not already anticipated. In response to that, investors will sell because there is nothing left for them to hope for and no major surprise.

People always buy stocks with a forward looking perspective. They might buy based on anticipation of a new product release or new legislation that might be passed that will make business better for a company. If the future event is a negative they will do the opposite and sell, driving the market or individual stock down. In this case the future event is the election and right now they are buying, hoping for a good result next Tuesday.

But rarely is the event as bad or as good as people imagine and that is why stocks often go in the opposite direction after the announcement or event occurs.