Boron Capital is a real estate investment firm located in Lubbock, Texas. In the following article, Boron Capital CEO Blake Templeton discusses what investors should expect with the shift in power in government.
The midterm elections ended with Nancy Pelosi giving up power to Kevin McCarthy and a split Congress. Republicans narrowly won the majority in the House after many tight races, and the Democrats retained the Senate. Predictions anticipated the result, but what could this outcome mean for the stock market and investors?
Historically, the United States of America's midterm election periods have been positive for the stock market. Boron Capital says that some economists believe it's due to the shared power results that often happen, as it did in the most recent midterms. After all, with smaller majorities, fewer legislations are passed, which means less change for the markets to react to, especially within the lame-duck session.
However, experts are quick to remind investors that the election results only impact the market to some extent. It's worth diving into other reasons behind the remaining uncertainty.
Governments Only Impact the Market So Much, But Pre-Existing Conditions Affect Them Immensely
Notably, the worldwide economy is forecasted to grow slowly at approximately 1.6% this year due to tightening financial conditions, Europe's natural gas issues, and the colder climates restricting China's COVID-19 policies. The globe is teetering on the edge of a recession since the inflation decline isn't sufficient to promote growth.
In fact, Bank of America CEO Brian Moynihan has indicated that he is preparing for the US government to default on its debt, due to surpassing its borrowing limit last month.
Boron Capital CEO Blake Templeton says during the first half of this year, the S&P 500 is predicted to realize the lows seen in 2022. However, it is possible that a shift from the Federal Reserve could see this change.
The Investor's Reality
Wells Fargo is expecting the market to establish a relatively wide trading range now that the midterm elections are over, and the duration and magnitude of the recession become more transparent.
Once top-level investors begin anticipating a repairing economy, the recovery period (predicted to happen during the latter half of 2023 and continue into 2024) could raise stock prices, even as wages and earnings decrease, reports Boron Capital. However, Boron Capital continues to point out that this discrepancy between wages and stock prices should, in itself, cause concern, since the real-world is increasingly not matching up with the stock world.
The Bottom Line: Decentralized Investments
Some experts are advocating for defensive equities positioning, preferring high-quality large and mid-sized companies in the United States of America, over small international ones.
However, others are suggesting investors decentralize (not just diversify) their portfolios as much as possible. That way, war rumors, pandemics, and politics, like the midterm results, won't affect retirement plans or future returns. It is a common belief within the stock community that one can diversify within stocks and mutual funds, but that is an unfortunate misunderstanding that has been widely propagated by people that are involved in selling stock and mutual fund products. The stock market should be seen as one egg in the basket, no matter how many companies one is invested in, since all the stock prices are driven primarily by one thing: Federal Reserve actions.
If the United States defaults on its debt, as the Bank of America CEO suggests, this will greatly amplify the faulty foundation that the stock market was built upon, exposing fault lines that have been lying dormant, ready to awaken and wreak havoc.
Boron Capital emphasizes that though there are thousands of companies within the stock market, the stock market itself is one singular secondary system, so beyond being centralized, it also only provides second-hand shares, which means the stock price is not directly tied to each companies' success or failure, but rather are, in unison, primarily controlled by the actions of the Federal Reserve. In order to control the money supply, the Federal Reserve often takes actions to drop the stock market, thus removing money supply by removing stock returns.
The modern resistance movement against centralization has emerged because it has become more clear that centralization has allowed for the manipulation of current circumstances. Thus, the savviest investors are heading out of the stock market space, transitioning into a decentralized portfolio of physical assets and useful digital assets. At the bare minimum, in the short term, there is still plenty of room for lower lows in the stock market if the corporate earnings forecasts are anything to go by.
But in the long term, decentralization away from the stock market will be crucial. Bear and bull markets are engineered by central banks actions, as they were intended to be when they were set up together, with both of the original institutions (stock market and central bank) being established by Alexander Hamilton. And even if the people's war for decentralization is not won, retirements can still be decentralized. The wisest investors move into the primary market, where real assets can be held, and are not directly under the control of the levers held by the central banks, whose entire purpose is to control your money supply.
