TVBee

I just can’t do it—I really can’t find a reason to think CPI will improve. Tonight’s CPI figures may be disappointing.

#CPI前瞻，12月利率走向迎关键考验

First, oil prices were on an upward trend from August to October, and the average price was high in October. See Figure 1.

Second, the consumer confidence index for October, released at the end of the month, rebounded. Strong consumption could push prices up by increasing demand. See Figure 2.

Third, the previous nonfarm payrolls data showed that both monthly and annual wage growth were fairly strong. This rapid income growth may be one reason consumer confidence is strong. See Figure 3.

The expected annual rates for headline CPI and core CPI are 3.9% and 2.8%, respectively—both fairly high. However, their expected monthly rates are 0.3% and 0.2%, respectively. Personally, I feel those monthly expectations are overly optimistic.

History rhymes remarkably well: Trump has lost both chambers. Is this a rebound or a reversal?

┈➤ Why did Trump lose?

History is rhyming. This isn’t Trump’s first midterm election, but in 2018 he only lost the House of Representatives and still held on to the Senate.

The only time in the past 30 years that both chambers changed hands was under George W. Bush in 2006. That may not be a coincidence: in 2003, George W. Bush went to war in Iraq.

Trump has been embroiled in a conflict with Iran for eight months, but the nuclear issue still hasn’t been resolved, the Strait hasn’t been reopened, and oil prices and inflation remain relatively high.

But in fact, Trump has had some achievements. For example, he captured Maduro at an extremely low cost. Although Venezuela hasn’t elected a new president yet, this has essentially brought the Chávez era to an end. The US government also signed an agreement with Venezuela, and oil companies should cooperate on oil production there going forward (Chevron is particularly keen).

Through DOGE and tariffs, he has brought in considerable additional revenue for the federal government.

There have also been large-scale interceptions of illegal immigrants, and the US violent crime rate has fallen considerably (reportedly to its lowest level in 125 years).

┈➤ Rebound or reversal?

First, I don’t think there will be an immediate reversal. As you can clearly see in Brother Bee’s chart in the previous article, after the midterm elections, unless the party holding the advantage in both chambers remains completely unchanged, major rallies have historically never started right away.

Fortunately, both chambers changed hands at the same time. If we go by historical precedent, the comparable year is 2006, not 2018. After the 2018 midterms, the market fell sharply again; in 2006, it mostly moved sideways with some volatility.

Second, although the makeup of the two chambers changed after the midterms, Trump is still president. The temporary budget approved earlier expires at the end of December, and we’ll have to wait and see what Trump’s subsequent budget proposal looks like.

There is little conflict between the two chambers right now, since both are dominated by Democrats. The main source of conflict is between the chambers and Trump, but that friction may be somewhat less intense. Perhaps this is one reason why market performance differed after the 2006 and 2018 midterms.

Third, do the two chambers have the power to stop Trump’s actions against Iran? If so, can they do it in the short term? And if they can, will that bring CPI down in the short term?

So Brother Bee’s personal view is this: there may still be a period of friction between the two chambers and Trump. If things move quickly, the market may improve in Q1 next year; if slowly, then in Q2.

History rhymes remarkably well: Trump has lost both chambers. Is this a rebound or a reversal?

┈➤ Why did Trump lose?

History is rhyming. This isn’t Trump’s first midterm election, but in 2018 he only lost the House of Representatives and still held on to the Senate.

The only time in the past 30 years that both chambers changed hands was under George W. Bush in 2006. That may not be a coincidence: in 2003, George W. Bush went to war in Iraq.

Trump has been embroiled in a conflict with Iran for eight months, but the nuclear issue still hasn’t been resolved, the Strait hasn’t been reopened, and oil prices and inflation remain relatively high.

But in fact, Trump has had some achievements. For example, he captured Maduro at an extremely low cost. Although Venezuela hasn’t elected a new president yet, this has essentially brought the Chávez era to an end. The US government also signed an agreement with Venezuela, and oil companies should cooperate on oil production there going forward (Chevron is particularly keen).

Through DOGE and tariffs, he has brought in considerable additional revenue for the federal government.

There have also been large-scale interceptions of illegal immigrants, and the US violent crime rate has fallen considerably (reportedly to its lowest level in 125 years).

┈➤ Rebound or reversal?

First, I don’t think there will be an immediate reversal. As you can clearly see in Brother Bee’s chart in the previous article, after the midterm elections, unless the party holding the advantage in both chambers remains completely unchanged, major rallies have historically never started right away.

Fortunately, both chambers changed hands at the same time. If we go by historical precedent, the comparable year is 2006, not 2018. After the 2018 midterms, the market fell sharply again; in 2006, it mostly moved sideways with some volatility.

Second, although the makeup of the two chambers changed after the midterms, Trump is still president. The temporary budget approved earlier expires at the end of December, and we’ll have to wait and see what Trump’s subsequent budget proposal looks like.

There is little conflict between the two chambers right now, since both are dominated by Democrats. The main source of conflict is between the chambers and Trump, but that friction may be somewhat less intense. Perhaps this is one reason why market performance differed after the 2006 and 2018 midterms.

Third, do the two chambers have the power to stop Trump’s actions against Iran? If so, can they do it in the short term? And if they can, will that bring CPI down in the short term?

So Brother Bee’s personal view is this: there may still be a period of friction between the two chambers and Trump. If things move quickly, the market may improve in Q1 next year; if slowly, then in Q2.

History rhymes remarkably well: Trump has lost both chambers. Is this a rebound or a reversal?

┈➤ Why did Trump lose?

History is rhyming. This isn’t Trump’s first midterm election, but in 2018 he only lost the House of Representatives and still held on to the Senate.

The only time in the past 30 years that both chambers changed hands was under George W. Bush in 2006. That may not be a coincidence: in 2003, George W. Bush went to war in Iraq.

Trump has been embroiled in a conflict with Iran for eight months, but the nuclear issue still hasn’t been resolved, the Strait hasn’t been reopened, and oil prices and inflation remain relatively high.

But in fact, Trump has had some achievements. For example, he captured Maduro at an extremely low cost. Although Venezuela hasn’t elected a new president yet, this has essentially brought the Chávez era to an end. The US government also signed an agreement with Venezuela, and oil companies should cooperate on oil production there going forward (Chevron is particularly keen).

Through DOGE and tariffs, he has brought in considerable additional revenue for the federal government.

There have also been large-scale interceptions of illegal immigrants, and the US violent crime rate has fallen considerably (reportedly to its lowest level in 125 years).

┈➤ Rebound or reversal?

First, I don’t think there will be an immediate reversal. As you can clearly see in Brother Bee’s chart in the previous article, after the midterm elections, unless the party holding the advantage in both chambers remains completely unchanged, major rallies have historically never started right away.

Fortunately, both chambers changed hands at the same time. If we go by historical precedent, the comparable year is 2006, not 2018. After the 2018 midterms, the market fell sharply again; in 2006, it mostly moved sideways with some volatility.

Second, although the makeup of the two chambers changed after the midterms, Trump is still president. The temporary budget approved earlier expires at the end of December, and we’ll have to wait and see what Trump’s subsequent budget proposal looks like.

There is little conflict between the two chambers right now, since both are dominated by Democrats. The main source of conflict is between the chambers and Trump, but that friction may be somewhat less intense. Perhaps this is one reason why market performance differed after the 2006 and 2018 midterms.

Third, do the two chambers have the power to stop Trump’s actions against Iran? If so, can they do it in the short term? And if they can, will that bring CPI down in the short term?

So Brother Bee’s personal view is this: there may still be a period of friction between the two chambers and Trump. If things move quickly, the market may improve in Q1 next year; if slowly, then in Q2.

Believe it or not! U.S. stocks just seem to like falling before midterm elections. So what happens after the midterms?

┈➤ A drop is highly likely before the midterms

Looking at the past 30 years, including this year, there have been eight midterm elections. The only time U.S. stocks didn’t fall before the midterms was 2014, although the Nasdaq 100 still had a sharp intraday dip in October.

In 1998, there was a pullback amid a strong uptrend.
In 2002, stocks fell to a bottom.
In 2006, stocks fell six months before the midterms, then recovered in the three months leading up to the election.
In 2010, stocks also fell early, then recovered in the three months before the election.
In 2018, stocks fell for three straight months before the election.
In 2022, the market also bottomed out.

Although the overall trend in U.S. stocks over the past 30 years has been upward, steep drops or larger pullbacks have been more likely to occur around midterm elections.

So, is the current decline in U.S. stocks due to the midterms, or is the AI bubble bursting?

┈➤ What happens after the midterms?

In 1998, the parties with majorities in both chambers remained unchanged, and U.S. stocks took off.

In 2006, control of both chambers changed hands. U.S. stocks traded sideways for four to five months (with the S&P 500 rising moderately at first), then moved higher.

In the other five elections, one party kept its majority while the other changed hands. Except in 2010, U.S. stocks generally pulled back for two or three months after the midterms, then rose.

┈➤ What about this year?

The Democrats are highly likely to win the House. They’re also favored to win the Senate, but that race is a little uncertain. That’s because all House seats are up for election, while only one-third of Senate seats are.

If the Republicans hold on to the Senate but lose the House, it would be just like the 2018 midterms. U.S. stocks fell for two months after the 2018 midterms.

If the Republicans lose both chambers, that would be very similar to 2006, when U.S. stocks spent about four months consolidating after the midterms.

Of course, this is an imperfect historical comparison. But one thing seems fairly certain: U.S. stocks are unlikely to take off immediately after the midterms.

Overall, Brother Feng thinks things will start to improve more reliably from Q2 next year onward, but it’s not certain before then. In a pessimistic scenario, stocks could fall for another two months; in an optimistic one, they could trade sideways.

As for crypto, don’t rely on historical analogies. As long as there’s no major liquidity black swan, BTC will fall, but the decline won’t be especially dramatic.