The Rally Nobody Expected

SPEAKER_01 0:05

The biggest rally of our lifetime may have just started this week. That's what Winston just told me. And it is set off by the one thing everybody was told would crash the stock market. For months, people had warned that this exact election result, a democratic sweep, would wreck voices and stocks. So they sold. They went to cash. And 90% of them are now sitting there waiting for a crash. Well, that hasn't really come unless you're one very specific sector. And this has happened seven times since 1954. If you've been watching me, you already know about this. A Republican president loses both halves of Congress to Democrats. A year later, every single time stocks were higher. And this week made it the eighth. Wall Street New. The Dow just had its best day of the year, but the market does not go up as one. And maybe some of you are in pain. If you're in pain right now, put pain in the comments down below. It's not your fault, but we'll fix it for you. Because while the Dow threw its party, one corner got hammered, and the stocks everybody had piled into for the last two years dropped under a line that the pros watch harder than almost anything. Now the next thing is annoying, but I was positioned for that before the votes were counted. I will pull up all of this life in a minute, including how far stocks ran those seven previous times. So stick with me. This one really, really does matter. My name is Felix Nicholas Preen. I'm an economist and former investment banker. I'm also the founder of the Preen Institute, where we publish research on financial markets and also instructions on how they actually work. I take zero sponsorships, zero endorsements ever, so I can say whatever I like, and that's just the way I like it. And no, this is not a political video. I get accused of that all the time. I don't care who you voted for. Red, blue, green, yellow, whatever. It's fine by me. Your money doesn't have a party, and it shouldn't. So there's a lot of stuff that's moving this week. Very, very important to understand. The election, oil, the chip stocks, gold, the lots. I put all of that research behind this video into one free report from our institute. It's got the full table of those seven elections with what stocks did one month, three months, six months, twelve months later. So the sectors that have tended to lead after midterms, the ones that have lacked, a checklist, tons of stuff. It's all free. Felixfriends.org slash boom is where you get that. It's down below in the description in the link as well. And absolutely love that you're watching this because I love people who want to learn about how the markets really work, because in my humble opinion, it's the path to freedom.

Fear Selling And Hidden Damage

SPEAKER_01 2:43

So let's start with a bit everybody gets raw. For most of this year, you couldn't open up social media without someone telling you the stock market would crash. I may have been guilty of that once or twice myself, but once you make it past the headline, you'll understand what I'm actually talking about. If the Democrats took Congress, people were saying this. I saw one post this week that put it perfectly. Somebody wrote out this line: the stock market will crash when Democrats are elected. And underneath it it said, the market, and it showed a chart of a dollar invested in American stocks since 1926. Well, have a look at the red presidents on this chart. It's on the screen here. Blue presidents. And what happens? Well, the line just goes up and up and up and up nearly 100 years ago. Then the results came in. Democrats took the House and the Senate. And the next day, the Dar Jones, which tracks 30 of America's biggest, oldest, shiniest companies, went up 3%. That's 1,500 points. Best day of the year. The SP, America's 500 biggest companies, went up 1.6%. And the Nasdaq, which is stuffed with those technology companies, was up 1.4%. So who got hurt? Well, not the people who did nothing for once. The people who got hurt are the ones who did something. They sold in October and they went into cash because they got scared. And now they've got a terrible choice. Buy back in hire or sit and watch. There's a second group that also got hurt, and they don't even know it yet. Say you're, you know, 50 years old, you did everything right, you put your money in a big fund years ago and you got on with your life, you worked hard. Well, look at your fund this week, and it probably looks fine because the index went up. But underneath it was carnage

Sector Rotation And The 200-Day

SPEAKER_01 4:23

in places. Energy stocks, down over 6%. This is a sector rotation thing you can track in the Winston app, links down below, free trial and all that. You don't like if you cancel it. So the chip stocks also fell through a line the professionals treat at as the difference between an uptrend and a downtrend. And I put it on the screen here for you. This is SMH, which is the semiconductor index fund, the sort of major one. And there's the line on here, which is blue, right? And um I have to check, the glasses make it green. And um, it's it's my version of you know LSD. It's uh it's it's healthier for you. And um that 200-day moving average line, which is what that is, we've just dropped below it. When was the last time we did that? Well, we last did that in April 2025, which was actually a pretty good buying opportunity if you go back to it, right? The previous time we did that meaningfully was in September or rather sort of early 2022, right? It was trading at 84, then it's trading at 498 right now. Again, I'm not telling you to buy this, I'm just saying these little dips have historically been pretty good. Why? Because the world actually runs on semiconductors, whether you like them or not. So what went up? Well, consumer discretionary, consumer staples, real estate, financials, healthcare, these went up against more than the index. If you look at the absolute returns, they did even better. But I always like to go look at compare it against the index because that's kind of tells me a lot more about whether the money is really flowing. But you can see some big, beautiful winners and some pretty horrendous losers. But remember, the market overreacts both ways every time. It overreacted to the fear in October. Some corners overreacted this week, in my humble opinion. And if you can't tell which bit is the overreaction, you end up selling the bottom on the one thing and holding the top on another, and it's never really very much fun. And spotting that is a skill, a skill that can be definitely learned. So think about where that leaves you right now. Your money is sitting in a market that just changed leadership in 24 hours. Oil fell 8% in a day. Energy got thrown out of the window with the baby in the bathroom water, right? Um, which is good for me because I made money out of it. But the chip stocks that carried the whole market for two years, they're like beaten up and crying in the corner. And at the same time, the shops, the banks, the big platforms that own the data centers were bit apart. And I'll explain to you why that happened. But if your money is in the wrong pot, and these are just 12 of these pots, they're actually about 150 in total, but this is just a simplification. Well, it doesn't really matter how good the index looks. You lose. You lose slowly, and you don't notice until, you know, your retirement gets pushed back by a few years. In my humble opinion, the window on this is short. Look at those seven elections again in a minute, and I'll and you will see the biggest part of the move came in the first three months. On average, stocks were up more than 10% within three months of that vote. I'm not promising you that I haven't got a crystal ball, but that's the historic pattern. The clock started ticking on Tuesday. Spotting where the money is going next is a skill, a skill you were never taught because school and college is largely useless when it comes to money. So our whole mission here is to right that wrong. So this Saturday, the 7th of November, I'm going to teach you live and for free. And I call it the Great Pivot because the money pivots from chips into something else. It's at 9 a.m. New York time, 2 p.m. London time, 3 p.m. if you live on the uh Soviet continent of Europe. Uh, if you're in Asia or down under, you're gonna have to figure out what time it is. You're gonna have to be up a little bit late and ask for parents' permission. And our goal there is to leave you with a game plan for not just this market, but for every market to come, so that you are more skilled. Not a stock tip list, but make you more skilled. So on Saturday, I'll show you exactly how I worked out what was actually gonna happen here. And I'm not always right, absolutely not, but the point is not to be horribly wrong. And if you just learn that, you're gonna do a lot better. So join us at greatpivot.org. Link is down in the description down below. Duolingo, the stock is flying, by the way. Apparently, everyone's gonna learn Spanish in the US. Uh so back to those seven

Midterm History And Why Gridlock Wins

SPEAKER_01 8:40

elections. This is a chart from I don't know who. Um, looks a bit like the FT, but it's probably AI. Um, it shows every time since 1954 that a Republican president has lost Congress to the Democrats at midterms. 1954 and 1958, that was Eisenhower, 70 was Nixon, 74 was Ford, 86 was Reagan, 90 under the you know, Bush the primary, uh, and then 2006 under Bush the secondary. Uh and that happened seven times. So it also shows what the SP did afterwards. That's what the bars are. One month later, two percent up on average. Three months later, 10% up on average, six months later, 17% up on average, and a year later, 15% up on average. Positive all seven times. And that's pretty extraordinary, isn't it? 15% in a year on average, after the exact results that some of you are celebrating and some of you are terrified of, depending on what side of the aisle you happen to wake up. And Trump is now the eighth president on this list. And it isn't just me putting this out, JP Morgan, the mighty, their market intelligence team, which apparently is the most intelligent team in the world, just ask them, they'll tell you. They put out a note this week, and they say the SP 500 has been up a year after every single midterm election since 1950. Whoever won with an average gain of around 15%, which is what I just talked to. And since 1990, they've broken it down even further. Here it is, three months after the midterms, 5% up, uh, six months after 11% up, nine months after 12% up, a year after 14% up, and so on. So it's been up every single time since 1990. So why? Why would Wall Street cheer a government that can't agree on anything because that's what's going to happen? Well, let me put it in as plain English as I can. When the White House and Congress are run by different parties, almost nothing big gets done. Taxes stay where they are, regulation doesn't really change. It's like having, well, gridlock. And guess what? The market loves gridlock. The more gridlocked your government, the better the stock market. Why? Because it's predictable. We know nothing big's gonna happen. No bright, shiny ideas, no new, you know, let's save the world type things. Um, wonderful if you're an investor. And maybe you think it's terrible because you really wanted your party to do something particularly special, but you know what? The stock market, your money, doesn't care for special or any kind of change. The right now, the constant is just about good enough. Now, is there an exception to this? Yes, Ford, 1974. We were down 10% a month later, 18% up a year higher. Why? It was high oil and sticky inflation. And there's of course some parallel to what's happening in the Middle East there, so pay attention to that. And Reagan uh just did a well, it was up a percent later because we had a 1987 crash. So this does not say be blind, everything is going to go up in a straight line, by the way, right? Always invest and trade with a plan. But let me just break down one or two more of these

Oil Shock And Energy Gets Hit

SPEAKER_01 11:44

rotations because it's so important. And here's a table again I'm just showing you. And it's really, really personal to you in your portfolio because the market is not one market. It doesn't go up as one. Look at the sector rotation again. It splits the American stock market into its 11 big sectors and it shows which ones are leading and which ones are lagging. And I've got it set to just one day, last day, right, day after election. And I compare it against the SP 500 here. And energy went down over 6% against the market in a single term. So the energy sector, which is an index fund called XLE, fell like just under 5% that day. The SP went up 1.5% that day. So, you know, there you are. Industrials were down, technology was down, utilities were down. Meanwhile, the money poured into shops, restaurants, consumer discretionary, the stuff people buy when they feel good. For the same day, same market, and the gap between the best sector and the worst sector was always nine percentage points. And that's what I mean when I say money doesn't leave the market, it moves from one pot to another. So why did energy get hit so hard? Well, oil. Brent crude, the global oil price fell 8% in a day. Why? Because people will think that Trump has less backing to continue the Middle East war because he has just less sort of political cloud right now, right? And here is that actual chart, and you can see the harsh pullback. You can see this consumer discretionary, which is absolutely flying. So, what did I do before this election? Well, I was short energy and I was long, most other things. Uh doesn't really matter what I do. But maybe take a screenshot of this one here, because this is actually quite important. A year after midterms, and again, this is uh JP Morgan data, you know, hail the mighty, uh and all that, they really are wonderful people, the best people in the world, absolutely, you know, cure cancer and everything else, it just in it for the little man and then saving humankind and then you know that kind of thing, which probably makes me get away with using their charts. Um, so yes, the index did well, 15% up almost on the year. But look at consumer staples, they were down 8% on the year, energy was down 5% on the year, real estate was down 6% on the year, utilities were down 8% on the year. So it wasn't bloody equal, was it? It wasn't all the same. So if you potentially want to outperform, you might need to understand at least these 11 sectors and what moves them and why. I think oil is really the one to watch. Let's see what the American buildup in the Middle East is doing, whether we're going to see another bombardment or whether it's the final fireworks or whatever. We'll

AI Concentration Risk And Sleep Loss

SPEAKER_01 14:20

see, and that'll obviously have an impact. But if you are, like many people, just purely in chip stocks, and this popped up in my uh Twitter feed, and I don't know who this guy is, no uh no diss to him whatsoever, but he says, we are effed, absolutely effed. The AI trade is over. We all top blasted and holding backs. Now I can't believe it. How could we have been so wrong? This market makes no sense, my spleen hurts, I haven't seen green in such a long time. I miss money, I miss smiling, I miss sleeping, not checking my phone every one minute, I miss waking up happy I should have stayed in cash. Um, the problem is that this chap, unfortunately, gives you real-time alerts, those traits, and uh presumably there's a payment for that, uh, the delight. And I guess imagine that this is his portfolio uh yesterday, which is basically a pure bet on pure AI. Right? Which is just unfortunate. I feel very sorry for the chap. Uh, but he doesn't realize that there is a world out there that isn't AI. He doesn't realize the healthcare stocks, real estate stocks, consumer staple stocks, material stocks, really boring crap that would have shielded him from this horrible thing that's now making him lose sleep. And my goal is that less and less people will make those mistakes. Because yes, semiconductors got clobbered like a baby seal. That's a profession Wall Street term, by the way, not mine. It's a very nice term, is it? Um, but um, if you bet all your money on one thing, and if you're feeling some pain right now, use it as a lesson, use it as a motivation to not do it again. Because this chap, I just showed you, clearly hasn't learned the lesson because he then rambles on about how hedge funds manipulate the market and and you know, all that sort of stuff. Doesn't for a second think that he might have a skill gap and that he's actually to blame for it, right? I'm always to blame for all my losses. I'm also to blame for my winners. And it's the same for you. If you want to take credit for the winners, you need to take credit for the losses. And if you have outsized losses, and outsized simply means you are checking your phone every five minutes, you're not sleeping well, you're thinking about it, and you're not a happy person, you've got too much risk on. So we need to do something about that. So come and join us on Saturday and we'll we'll fix that for you. And quite honestly, I think we're nearing a point where semiconductors are becoming an opportunity again, and I will I will then buy them again. Um, not quite yet, but I will at some

Data Centers Shift Power To Big Tech

SPEAKER_01 16:51

point. But the real play, this is really what I wanted to understand, is there were a lot of stocks that did really well in the last day. And who was it? It was Amazon, it was it was Google, it was um Microsoft. Why? Because these are the guys with the biggest data centers on the planet, and they're already built, they've already got power. And if we're now entering a world where US now democratic states like Texas will say, no, we're not gonna build as many data centers because we're short of electricity or whatever, um, then who benefits from this? Well, these guys effectively become monopolies. And all these neo-clouds and little cloud companies and the memory and the chip guys and so on, they'll have less demand. But it also means if you're Microsoft or Amazon or Google, you can now justify spending less on chips and memory and data centers because they can't get built. But you're still the guy with the biggest, you know, data center. That's what you're thinking, wasn't it? Um, and therefore you win, right? It's actually brilliant for them. So if you were Microsoft or Amazon or Google, what would you have done? You would have funded the Democrats in Texas to your heart's content, right? I don't know if they did that, but that would have been the smart thing to do from a pure money point of view. Because Texas really matters. Texas has 27% of all planned American data center capacity, says Welt Fargo, who was also getting clobbered to death yesterday. The new governor said we're going to have a moratorium, which is a fancy word for we will all die. No, it's a fancy word for uh we will freeze everything and not approve another one. They also want Georgia, Ohio, Pennsylvania, apparently, and they'll do the same thing there. So Microsoft up 6%, Amazon up 6%, Alphabet up 3%, Meta up 1%, these guys win, chip suppliers lose, the builders lose, Corweef, Nebius, Irene, all these, you know, these companies are amazing. Now, some of those companies, if you go back into them, they used to mine cryptocurrency about 18 months ago. Uh and before that, it was whatever the latest thing was. So always be a little bit careful with companies that chase after the latest thing. So some beautiful charts here on some of the big tech guys. Um, but the chip guys will have to adjust potentially their their future because the chip orders will get spread over a longer period of time, which will slow down uh their growth and neo clouds. Um, well, I've warned about that previously. Uh it's uh not where I would put my money. Core weave here. Uh I trade it sometimes, I make money out of it, uh, hopefully. But yeah. Now there is something that is important. The market overreacts. So always look at if you want to trade something like that, which is the least and the and and the most risky. Uh and again, that's one of the things we look up in the in the Winston up. So if you go into stocks, look at look at are there any of those in the danger zone? And you can go into hey, say, AI infrastructure, and you can look at there are some zombies here. Corweef is a is a zombie company. Uh, what do I mean by that? Well, they've got no cash, they can't pay their interest, they owe 3.7 times the value of their company as debt, right? So, yes, they've got a bit of cash in the bank, 3 billion or so, but that's gonna likely run out. So these companies are the riskiest out there that I would be very, very, very cautious of. And I would look that up actually for every sector and every bit of something that you own because it's important. Again, link down below.

Gold Flushes Out Forced Sellers

SPEAKER_01 20:20

Now, quick word on gold. Gold's at the lowest price, more or less in a year. Um, I'm quite liking it. Why? Because we've had some serious margin calls on gold. And the more you pull up a gold chart for you, and the longer you get these sell-off periods, people get flushed out. So we started to see the last two days here a little bit of nibbling, 3%, 1.7%, um, on gold again, on some relatively decent volume, biggest green candle we've seen since uh you know, a while, uh since sort of August, which was a mini sort of fake breakout there. So the longer these sideways journeys go on for, right, the longer we do bugger all essentially, the better the setup. Because the people with who wanted to sell already sold, right? Last year that was the setup, right? So we're now looking at a period that is actually equivalent in terms of length. I hope it goes further and more sideways for longer, because that will then potentially set up a much, much bigger, more beautiful, more shiny breakout. And gold breakouts are very, very shiny. Commerce Bank, pay no attention to the lunatics, uh, say gold's October reaction was overdone. Now I would trust Commerce Bank, but about as far as I can throw them. And I imagine they're fairly heavy. Um, but how does a margin call work? Well, say you um borrow to buy tech stocks, and your tech stocks got clobbered yesterday and they're down 10%. Uh, your broker says, Show me the money, and you haven't got any. So your broker will then say, Well, sell something, or we'll do it for you. And one of the things that's the fastest to sell, especially on a day like yesterday. So margin courts are a beautiful thing if you're not on them. But this is a lovely chart here, and we should credit whoever made it. Uh, whoever Peter uh Malukas, uh, good on you. Well done on the chart. It's a very good chart. And he said over the last 50 years, inflation was 6x. I think it was a lot more, but that's the official government lie, sorry, number. Um, treasury bills went up eight times. The SP 500 went up 277 times. So being invested is the winning path. Now, being invested better is better than being invested terribly. Uh so think about that, like that poor chap um who is you know losing sleep right now. So be an owner. That's what I would definitely say.

Key Risks And The Live Invite

SPEAKER_01 22:46

And just to summarize, why I think this is a wonderful setup, uh, the divided government keeps rules steady, as in Bagal's gonna happen in Washington the next two years. Uh, oil could drop a lot if the appetite for bombing another Middle Eastern country into the dust uh is is a little bit less pronounced. And historically the pattern is that we get very, very strong years after this kind of election, which you may love or loath. It doesn't really matter. Slight warning, and I would write this down. Funding runs out on the 11th of December for the US government. Uh, expect a squabble or a wobble. The Fed could raise interest rates in December. The market expects it. Now, if oil comes down, that won't happen. If oil stays up, that is more likely to happen. And beyond the midterms, Congress faces converging year-end deadlines. I don't know what that means, so we'll scroll past it. And uh, yeah, chip stocks are um under the 200 day moving average line for a reason. So the market needs to adjust to that. I wouldn't be too early on the dip buying there. Um, and and obviously a Middle Eastern deal is isn't easy because on the one side you've got uh the commander-in-chief, on the other side, you have the uh um Almighty himself, the the Ayatollah. Uh quite a hard crowd to get to you know become reasonable. So put it all together. Energy chip stocks are out. The mag 5 or whatever they are uh are um are doing wonderfully. Uh gold got dumped by forced sellers, it then bounced. I see that as a good sign. I'm hoping it's gonna go sideways for longer. And I think we have in a tremendous pivot in the market coming up where no, Nvidia will not go up in a straight line forever after. Um, because people built David S and those more slowly, then you know what the whole growth story gets elongated, uh, not clobbered to death, but just it's just more gradual, more slow, which the market has to adjust to. So come and learn how this pivots, build your game plan, spot the where the money is moving, and know when to do something about it at greatpivot.org at this Saturday, the 7th of November, 9 a.m. New York time, 2 p.m. London time, 3 p.m. in Europe, and at ungodly hours everywhere else. The question is just whether you want to learn it. No, there will not be a replay. We don't do those because people don't watch them. It's true. I know you will want an exception, but it's just true if the data. So join us live. You can ask me questions, and I'm excited to see you there. And if you got some value out of this, well, share this with a friend. Share the great pivot.org with a friend, and I wish you all the best.

SPEAKER_00 25:17

Right now, I think we're going through some sort of weird phase transition. And normally, when you get bad economic news or you get bad jobs data, that people are going to fly to safety into the bond market.