News Bites
Midterms are 'seasonally bullish' for markets; A Republican Congress would create beneficial 'deadlock' - Bill Baruch
Tuesday’s midterm elections are likely to see a Republican victory, which would lead to beneficial “deadlock” on Capitol Hill, said Bill Baruch, President of Blue Line Futures.
“If the Democrats win this election, and I don’t think they will… then there’s likely to be more spending, which could lead to higher yields,” he said. “I don’t think that’s going to be the case, so I’m pretty bullish right now.”
He added that election season is “seasonally bullish” for markets, based on historical data.
“Historically, it’s the most seasonally bullish time of year,” he explained. “For the period of six to nine months or so after the midterms, that’s when you want to be buying… but you’ve got to see Republicans take some seats.” Baruch spoke with David Lin, Anchor and Producer at Kitco News.
Housing and Inflation
The S&P Case-Shiller housing price index shows that the pace of housing price increases has started to cool. As the Fed raises rates, pushing mortgage rates up and house prices down, Baruch said that firms and individuals are waiting patiently with cash for an opportunity to buy property.
“There are venture capital firms that are ready to buy houses and assets,” he said. “At the same time, I have a lot of clients that are wealthy individuals… and they’re waiting for prices to come down, and they have cash.”
Some traders have speculated that housing prices will stay elevated, due to these wealthy investors. Baruch said that this would keep inflation elevated.
“Inflation’s not backing down, because there are sticky portions of it, which are the rents,” he said. “I do expect owner-equivalent rents to start coming down in the first quarter, but it’s not coming down now, and it’s one-third of CPI.”
Geopolitical Risk and Gold
After Russia invaded Ukraine in February, the price of gold rose to just over $2,000 per ounce. Baruch stressed that this is due to gold’s perceived “safe haven” properties.
However, he added that not all geopolitical tensions cause gold’s price to rise higher.
“A lot of the time, if gold is in an uptrend at the outbreak of the war, you actually could get capitulatory action, where people are already long and it has served its purpose,” he said. “It met its purpose and then rallied into the headlines of war. Buy the rumor, sell the news.”
Gold is currently trading near $1,675. Baruch claimed that other geopolitical events could affect its price.
“I wouldn’t deny that the news of North Korea [firing missiles] on Friday was a tailwind to what we were seeing in gold and silver,” he said. “Maybe we’re starting to see something that could happen with China and Taiwan.”
To find out Baruch’s oil price outlook, watch the video above
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