VRA Investment Letter: Political Earthquake; What it Really Means. Market Update and VRA Portfolio Positioning.

Good Wednesday afternoon. Last nights political earthquake will be studied and analyzed for decades, but at the end of the day this election was the country screaming its displeasure over the Iran war and everything that came with it, namely the cost of living and resulting broad division that erupted inside the Republican Party. This was the punishment for not holding true to Trumps promise of no new wars and alienating much of his base. Add that it was a midterm election and in hindsight, this end result should not be that surprising. 

We’re seeing a lot of worst case scenarios as a result…real gnashing of teeth, end of Roman Empire type stuff…but there are important points to keep in mind;

1) R’s control the White House, along with Trumps veto power that comes with it (more on this later). 

2) The 6-3 Supreme Court will act as a stabilizing force.

3) R’s control the Executive branch, which includes the DOJ, FBI, DHS, ICE, HHS and State Dept.

4) Trump controls the military. 

5) With thanks to Trump, Elon Musk and a slew of conservative media (that will be energized to broadcast far left insanity) we still have free speech and yes, the 2nd Amendment. 

6) Importantly, Trumps immigration, economic, and trade policies will remain in place. Trump still controls enforcement, tariffs, and has full executive action capabilities.  

7) Also importantly, border funding is locked in place through 2029. Democrats can block new bills, but they cannot reverse the tariffs or reopen the border.

The Power of the Presidential Veto 

Lost in the disappointment of last nights outcome is the vast power of the Presidential veto. Remember, 2/3’s of both the House and Senate are required to override a veto. That’s 67 Senators and 290 House members. It’s the single hardest thing to do in American lawmaking, which is exactly why it’s so rare. Since 1973, only 4% of Presidential vetoes have been overridden.

VRA Bottom Line: As we’ve covered over the last few weeks, a Dem win may well prove to be the best possible outcome for the 2028 presidential. Give these far left lawmakers just a bit of power and over the next two years they may fully demonstrate their insanity to the entire country. Then, a massive red wave in a 2028 Presidential election that matters far more than this midterm. If any President can work with a Dem congress, it’s this one. After all, on many of his economic policies he’s proven himself to be far closer to a Dem than to a traditionally conservative deal-maker.  

VRA Market Update

We’ve now entered a period with the most bullish analytics of my career….likely of anyones career. 

- Post the midterms, since 1950 the S&P 500 has put up an average gain of 29.9% with profits in 19/19 years (over the 15 months that follow the midterms). 

- In addition, also going back to 1950, the 6-month period directly after the midterms has produced an average gain of 14.6%, with gains in 19/19 time frames. Highly compelling, bullish data. 

As the election unfolded last night, US equity futures dove hard, with Dow Jones -900 and Nasdaq putting up a loss of more than 700 points. However, all of that began to change around 3 AM. As I write, Dow futures have now swung to +900 points with Nasdaq +120 points. We would expect today to be volatile, again with gnashing of teeth in the world of tech and data centers, but let’s also remember that the markets are the best discounting mechanism on the planet and we would expect that most of the damage has already been baked into the cake. We’ve already had a flush. 

Maybe most importantly, Trumps loss last night may well mean that additional (significant) military action against Iran is simply not in the cards. This was the ultimate flush of “missiles flying” that we’ve been discussing and waiting for. 

We’re well positioned in the VRA Portfolio (View Here) for the bullish analytics into year end (above) and throughout 2027. Over the history of the VRA, some of our best years have come from political set-ups just like this, when Dems appear to have far more power, meaning they can do far more damage. The markets like gridlock and they’re about to get plenty of that. We will be leaning into the fear. As with dot-com, which took place with a Dem president, little will slow down this Innovation Revolution and the surging economic growth that will continue to come with it. 

As to our positions in natural resource stocks, namely gold/silver/miners, last night’s outcome was likely ideal. Neither Trump or these newly empowered Dems are known as cost-cutting, debt-cutting monetarists, meaning the free-spending environment of DC may not just continue but speed up even further. This easy money environment will be hugely bullish for PM’s and miners, which is likely why gold is up 3% with silver up 4.7% and GDX showing gains of 5.8%. 

As to Tesla, Elon Musk will no doubt be a target of the left, which is why TSLA is trading down 4.5% to $380. Here, I would point you to my explainer of the election above and the very limited (ultimate) power that the left will have against him. I’d expect broad pardons for Musk and likely 1000’s more in the Trump administration from the law fare that’s likely headed their way. 

None of this will have much of impact over the next two years for Tesla, as they ramp their Cybercab launch…even if its in predominately red states, then globally…nor the 2027-2028 global launch of Optimus. 

My final takeaway; the left now has two years to prove to the country that they’re not a crazy, mentally unstable segment of the population. Unless they’re able to do that, the 2028 political earthquake may well come in the form of a Republican landslide.  

This is a time to stay locked in. As always we’ll be watching the VRA Investing System (currently 8/12 screens bullish) and our primary directional tells. If the data matters…and it most often does…this is a time frame that demands we remain aggressively invested. 

Until next time, thanks again for reading. 

Kip

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