Swing Trading The Election | Podcast Episode #445

0:07
Hey, I’m Ryan Mallory and this is my swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex, ever changing world of finance. Learn what it means to trade profitably and consistently, managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

0:25
You can succeed at the stock market and I’m ready to show you how. Hey everybody, this is Ryan Mallory with shareplanner.com’s Swing Trading the Stock Market. And today’s episode, probably not an episode that I really want to tackle, but I do think, and I encourage you guys to write me questions that are pressing for you or, or things that you are unsure of and would like to, to get a, another opinion on it. Even though I don’t necessarily want to tackle this issue just because I know no matter what happens, I’m going to take everybody off. I’m going to do it anyways.

0:56
So this e-mail comes from a guy. We’re just going to give him a good Florida red nickname like I always do because I’m from Florida, grew up, you know, in a, in a very redneck part of the country. So I like to assign people red nicknames to conceal their identity. So for this one, I’m going to give them Gator. If you remember Gator, that was actually a name used in the movie Other Guys, which is a phenomenally underappreciated Will Ferrell movie. I’m using the name Gator for the purposes of this e-mail and Gator writes.

1:23
Hey Ryan, long time listener, first time emailer. I love STSM podcast. It’s been a huge help to my trading. For those who don’t know STSM, that’s just the initials for this podcast, Swing trading the stock market. So I’ve been thinking about this upcoming Harris versus Trump showdown in November and how it might shake up the markets. It got me wondering, what’s your take on all of this? I’m curious how you think the election might stir things up for US traders. Any sectors you reckon might go for a wild ride depending on who wins?

1:52
He used reckon that might be the first person who used reckon in an e-mail. But hey, that’s awesome. He he’s like basically owning the Gator nickname. So anyways, he says any sectors you reckon might go for a wild ride depending on who wins. And hey, got any tricks up your sleeve for trading through all this political noise? Also, I am seeing in the these polls and predictions flying around, how much stock should we really be putting into them when we’re planning our trades? I figured that I can’t be the only one scratching my head over this stuff. If you’ve got any wisdom to drop on us in your next episode, that’d be awesome. Thanks for all you do, mate. Cheers, Gator.

2:23
All right, this is a good one. Now I feel like I have to do some disclaimers here because one, my intention is not to be political in this podcast and I have a history of trying not to immerse personal beliefs. Do I have personal beliefs? Yes, but I’m trying not to immerse the personal beliefs into swing trading. If you go into the, the trading room that I, that I run, I don’t let anybody get into politics. I don’t care if I agree with what they’re saying or not agree with them. They’re not putting it out there just because I’m trying to not sow seeds of discord and a discord. So I think it’s important though that I give you a little bit of background on me.

3:03
I I really don’t like this election at all. I don’t like the choices. I hate the whole thing really just a one issue person because I think there’s only one issue that matters and that is tackling the national debt. And then neither candidate shows that they want to tackle the national debt. So ultimately, I’m not sure when we look back on this moment, 100 years from now, we will have looked at either candidate as being a much better selection for this country because of the fact that the national debts not being fixed.

3:30
So you take the national debt, we’re adding about a trillion dollars worth of debt every 100 days. And that’s really your countdown timer to this country. I mean, if you cannot fix the national debt, if you cannot fix the spending, you’re not going to have a country as we currently know it. It’s going to be far worse. Your dollar is going to be worth far less. And that the quicker that we add trillion dollars, the rate of change of $1 trillion to the national debt is really going to be the countdown timer. So it’s a, it’s a horrible thing and nobody seems to care. So that’s my opinion.

4:05
Now, you can disagree with me, that’s fine. I know people have some very passionate issues. I’m just sharing you with what’s mine and the reason why I’m doing that. Just to give you a little bit of a understanding so that when I’m talking about how swing trading in the elections go together, you’re not saying to yourself, Oh my gosh, this guy is, you know, right wing, he’s left wing that that’s not my point here. My point is to talk about how it’s going to affect the price action come Election Day and the days that head up to it now and the days that head up to it.

4:37
I don’t expect there to be crazy whipsaws. I think there’s like particular events like we had the debates the other night and you saw a little bit of a market sell off taking place during the debates. I’m not sure what that was coming from, if it was because people thought Trump was losing the debate or they thought that Harris was perhaps winning the debate or vice versa. I don’t know exactly what caused that.

5:04
I think more importantly this, the market was still care, cared more about the CPI report that was coming out the following morning and it quickly pushed that to the side. So I don’t even think the debates are really all that serious. The one thing that’s interesting going into this election is you, you really have two incumbents that are running for office. You have Trump that was president from 26 to 2020. And then you really have what would traditionally be your incumbent with the vice president.

5:34
Like for instance, you take the Reagan years with Reagan and Bush. Bush was considered the incumbent when he ran in in 88. You take Clinton, Gore in 2000 when Gore ran for presidency after being vice president for Bill Clinton, he was considered the incumbent against George W Bush. So from the traditional sense, Harris is the incumbent, but also from something that we haven’t seen since the Teddy Roosevelt days, you really kind of have Trump running as an incumbent as well. So the markets more familiar with both candidates.

6:05
If Trump had never been president before, the market might be a little bit more nervous about him becoming president because here’s the reason why for that. The market doesn’t like change and there’s there’s a certain element of going from Harris to Trump that will be considered change in the eyes of the market, at least in the short term. So there there could be volatility. Now, if the market goes down, it may not necessarily be because the market doesn’t like Trump policies or they don’t, It doesn’t like how Trump might be as president. It’s essentially going down to hedge its bets against potential change, unforeseen change that could arise from a Trump presidency because again, market doesn’t like change.

6:47
So when there’s potential for change in the way things are currently running, the market doesn’t like it because it’s priced in a different kind of environment. Market likes predictability. If you look at intraday price action, you can often times see predictable behavior. And when that changes, that’s when things tend to go off the rails.

7:02
A predictable behavior out of the market is buying the dip. People will continue to buy the dip in the market until all of a sudden when they buy the dip, they’re getting punched in the nose and they’re they’re bleeding capital out of their account. Then all of a sudden you have a game changer in the market.

7:16
So in essence, even though Trump’s been president before, I think there’s probably more of a unpredictable nature to the market. Regardless of what he’s doing is good or bad or what he’s going to implement is good or bad, there’s still a part of the market that is concerned with the change.

7:32
I think the market probably assumes that if Harris is elected, she’s probably going to continue a very similar trajectory as if Biden was re elected. And so there’s less of a change to the markets in that regard. Now I’m not saying at all, guys, gosh, I feel like I’m going to have to do this through the whole podcast because I can always already hear emails from people saying why you got to say that, Why you got to say this.

7:54
What I’m trying to say is regardless if the change is good or bad, markets react to change. They react to things not being as predictable.

8:00
So you go back to the Trump election in 2016 and I, I remember this one pretty vividly. I was short the market going into the election because I did think that Trump, Trump was going to win it. And I know that was kind of going against the the tide at the time that thought Clinton was going to win the election. But so I was short the market thinking that Trump is going to win it for the very reason of like the change in the unpredictability that that a new president would bring versus somebody that was more established or part of the establishment per SE.

8:31
So in 2016, he starts to win Florida, he starts to win Ohio, he starts to win some of these other swing states like Michigan and Wisconsin. And what you saw was the market sell off big time. And they in fact, the market that night on 2016, it actually limited down, limited down. They had to pause the market. They had to turn on the circuit Breakers. And then when they started trading again, you saw an interesting phenomenon. And this is essentially what the circuit Breakers are supposed to do.

8:56
They’re supposed to take some of the emotion out of the market, which it did. And then all of a sudden it started rallying back. So you can imagine, you know, I’m, I’m short the market in the market is falling apart on election night in 2016. I’m thinking this is going to be a good day, you know, from my shorts in the next, the next morning. But once the market started trading again, you saw a gradual increase to where once the the, the market was opened, I had pretty much lost all the gains from that night.

9:26
So that was what we saw back in 2016. You saw a very volatile session. You saw circuit Breakers hit a lot of emotion, a lot of volatility. Ultimately the market recovered all the losses before the opening bell. 2020, you saw a much more less volatility to the downside, but you saw the market ultimately run 2% higher as a result of when Biden was elected. And so a lot more volatility on election night with Trump when he won in 2016 still yet volatility in 2020. Both of them really were tilted towards the bullish side.

9:58
But the difference between the two was, is that Trump’s resulted in a limit down in the beginning, but ultimately recovered by the open. So if you, you didn’t even pay attention to the election nights of, of either one in terms of I, you weren’t watching the futures, you woke up and you didn’t even realize what happened over the course of that night.

10:16
All of that is to say, would I go into the market leveraging myself? No, I wouldn’t be doing that. Would I go into the market trying to play the direction assuming that I know how the markets are going to predict based off of what candidate I think is going to elect? No, I did that in 2016.

10:37
I was right about who won, but I was ultimately wrong about the direction that it would take. I was, I was right about the direction during sleeping hours, but I was wrong about the direction when the market was actually open.

10:45
So it’s kind of like an earnings report. You may be able to say, yes, I think this company is going to beat earnings and I think the stock’s going to go up as a result of it. So the earnings comes out, you’re right, it beat on both top and bottom line, but then it tanks. We saw that with NVIDIA, did we not?

11:10
It beat, but it tanked. And so it can be like that with election night where you ultimately you think that you know how it’s going to turn out and how the market’s going to react, but it does something completely different. Even though the outcome of the event was correct, the market direction was wrong.

11:28
So you have to be very careful, just like you do with earnings, about trying to play it. Now, do I think it’s as big of an event for a portfolio as the individual impact that earnings can have on an individual stock? No.

11:39
Do I think the stock market’s going to go up 10% or down 10% the next day after the election? No. I mean stranger things have happened, but I think if that was the case with this close as the election has been in terms of polling over the past month since Harris became the nominee, I think we would see more of that volatility being played out on a day-to-day basis.

12:00
Yes, we’ve had some pretty big swings, but none of that’s been because of either candidate get into the lead when we had to sell off in early August and or from mid-july to early August that was over the yen carry trade. We’re seeing a little bit of volatility right now, but it’s not about the election.

12:18
As we get closer to the election, there may be a little bit of a pick up on it. But if there was going to be a massive swing, depending on who won, I think you would see that start to play out already because the market would be trying to get ahead of it and price it in. It’s not really doing that right now, but nonetheless, I wouldn’t be surprised if there was a 2 or a 3% swing in the market the following day in either direction.

12:37
So would I leverage into that election like I just asked?

12:48
No, I’m not going to leverage into it. I’m not going to, you know, if it’s the day of the election and it’s 5 minutes before the close, am I going to go buy SPXU 5 minutes before the market closes or TNA or T ZA? No, I’m not going to do that.

13:02
I would let let it play out instead. But if I have positions in place and I’m sitting on some profitable trades, I may go ahead and take some profits off the table and then let the rest run. Go ahead and curb some of that risk and let let’s see how the rest of it plays out as I would do with any normal trade.

13:19
But I’m not going to be initiating new trades like, you know, right before the close or even probably into that afternoon. Good chance. I probably won’t even make a trade that entire day.

13:26
Another thing that I would be careful of is directional option place, especially out of the money ones, because if you’re wrong, it’s probably going to go against you really bad. You’ll probably have a worthless option position the next day.

13:40
And if you’re playing the directional option plays just like you know, if you’re playing equities too, based off of what you expect the election outcome to be in the market’s reaction to it.

13:50
You really want to ask yourself if you have a bias that’s unchecked because the market doesn’t care about your political views. It doesn’t care about what you think the market should do as a result of your political views or how you think the election should turn out.

14:02
It’s going to do whatever it wants. And often times at these elections, it will surprise you and how it reacts.

14:09
For instance, I was here, I heard a snippet on CNBCI. Don’t watch CNBC, but sometimes they show up on my Twitter feed, you know, from somebody reposting. But Mark Cuban was on CNBC and he was talking with the hosts of their morning show and he was telling them that the Harris plan to tax unrealized gains, which was like 25% I think for people making over a 100 million, that it would crash the stock market.

14:29
But let’s say that she wins. Then that natural thought process would be, well, if she’s going to tax unrealized gains, that’s going to crash the stock market. Therefore, I’m going to buy puts because I think she’s going to win. I’m going to the profit from the downside when the market reacts to it.

14:49
But then if she wins and then all of a sudden you see the market rally, you’re like, why would they rally it? Don’t they know that she’s going to tax unrealized gains that’s going to crash the stock market? Yes, in theory you would be right to assume that, but the market also knows that that likelihood of passing that if you have a 50/50 Senate or even like a 52/48 or, or a House of Representatives that have very slim margins, there’s very good chances that will never even make it out of committee.

15:15
Because remember, especially for those listening overseas, in order to pass a bill here in the United States has to pass the House, has to pass the Senate, same exact version. So if it passes, the House goes to the Senate, Senate ads a bill to it doesn’t even matter if you know, they’re adding a, a toe Clipper for the White House.

15:33
It goes back to the House. They have to get, you know, a majority out of the 435 to pass it, to send it back to the Senate. Then the Senate has to take that bill up and try to pass it with the toe Clippers in there. And then after that it goes to the president for, for signage.

15:45
So, but the the caveat with the Senate is that you really for any bill to pass the Senate, you need 60 votes unless they get rid of the filibuster, which that’s always a possibility too, but that would require changing the rules of the Senate.

15:55
But one thing too that you can expect is when swing states are announced for one particular candidate over the other, you’ll probably see reactions in the futures market. As a result.

16:06
You can see 30–40 point swings, I would assume at the very least as a result of let’s say Wisconsin being announced for either candidate or Michigan or Pennsylvania is going to be another big one as well. Georgia, North Carolina, Nevada and Arizona.

16:22
Those are those are really the the major swing states that people are watching the closest. So while I said I would not, you know, be adding on, you know, aggressively new positions the day of the election. I’m also not going to go out of my way to be in cash.

16:37
I will, like I said, take some profits if the opportunity arises. If I am in cash, I’ll probably sleep a whole lot better that night too, but I’m not. Like I said, I’m not going to go out of my way. I sleep better every night that I’m in cash, but that doesn’t mean that I should always be in cash.

16:51
So far, I hope that I still have your attention here. I know that almost everybody listening has a strong opinion about both candidates. My goal is not to argue in favor of one candidate or the other. One thing I would say though is go check out swingtradingthestockmarket.com.

17:07
It goes alongside of this podcast as, as the way to get all of my stock market research each and every day. That’s going to include my videos that that give you my daily watch list, the stocks that I’m watching each day.

17:20
Plus you’re going to get access to the big tech updates or mega caps as I like to call them. Now that’s everything from Amazon, NVIDIA, Google, Microsoft, Apple, Tesla, Eli Lilly.

17:32
I know I’m forgetting a couple of them, but there’s about 8 in total. I, I follow them pretty closely. And then there’s also the stock market updates too, that I provide, as well as watchlist reviews. I go over my watchlist each day to let you know what I think is working, what’s not working, what will probably be taken off the watchlist, etcetera.

17:45
So check that out. swingtradingthestockmarket.com and the process you’re supporting this podcast. But one thing that I would say, and I’ve hinted at this a little bit, is political bias in our trading. And this goes beyond the election.

17:58
Our bias when it comes to our politics should never get into our swing trade. It’s a very hard thing to do, but when traders allow political bias to get into their trades, the traders suffer, their capital suffers because political bias and market direction do not go hand in hand.

18:17
In fact, they go opposite directions. The correlation between the two, it couldn’t be worse. And that’s what a lot of trading in general, not just around political bias, but bias towards particular stocks has become.

18:30
It’s become a cheerleading event. It’s become a rah rah. Like how dare you speak out against my stocks? How dare you say something negative? Like I can say something negative about the stock. It doesn’t ultimately impact stock.

18:41
If if I say something negative about a stock, like I think Walmart’s going down from 77 down to 60 and it does that, it had nothing to do with me. I didn’t ’cause that that was the stock doing that. Or if I say, I think Nvidia’s is going from 100 to at 1:30 over the course of the next two weeks.

18:59
If I say that and it happens, it’s not because of me. I didn’t, I might have been right on the prediction, but that doesn’t mean the move was because of me. And so, so much it’s, it’s like kind of like sporting events.

19:11
I like the Miami Dolphins a lot. I love cheering for them. Whether I cheer for them or not doesn’t really matter. They’re the outcome for the Miami Dolphins is going to be the same whether or not I remain a fan of them or if I don’t, which is probably more along the lines of they’ll disappoint. They always do.

19:26
But my my cheering for the Miami Dolphins can’t actually propel them to wins. And it’s the same with stocks. We can be fanboys or fan girls of a stock. Just because we like the stock doesn’t mean it’s going to go up.

19:40
So it benefits us to have a clear lens when we’re looking at individual stocks. And likewise with political bias, it’s not a profitable thing to be politically biased and have what you’re trading.

19:50
One of the ones that I see it most with is with the the DJT stock. That’s the Donald Trump stock that that has the whole Truth Social website. But if I post a chart of DJT and I show a rising trend line on it, I will hear from the left. Ryan, you’re just a right wing nut job supporting Donald Trump just because I drew a line on there that had a arch to the upside.

20:18
Now, if I take that same chart and I draw a declining trend line on there, I will hear from the right Ryan, you’re a Trump hater, you’re a Lib tard, whatever. And why do I hear that because of a line on the chart?

20:27
It’s because people’s political bias has infiltrated their trading. And regardless of what direction the line is, if you’re getting worked up about lines on a chart, it’s safe to say that your swing trading career is doomed from the start.

20:45
Huh. Is that just rhyme?

20:47
If you’re getting worked up about lines on the chart, then your swing trading is doomed from the start.

20:55
It’s actually not bad guys. Don’t you guys go out there trying to make that your own?

20:59
I’d said it first. Time stamped, double stamped.

21:03
Triple stamped, no take backs. OK, I hope I still have you guys from here. I guess if both sides probably hate me after this podcast episode, I did a good job.

21:12
But in essence, and this is where we can wrap it up with yes, there will be some volatility on Election Day. I don’t think there’ll be as much of it leading up to it unless there is just some radical swing and or shift and and policy and there’s the likelihood of it getting passed, then yes, you could see something like that happen.

21:35
But if the current the state of the election remains the same in terms of policies, in terms of position, in terms of national sentiment, I don’t think you’re going to see some kind of absolute market meltdown and and treated almost as like a mini earnings event or like a FOMC event. That’s probably the better way.

21:53
Let’s say that we were going into an FOMC event and it was 50/50 whether or not they were going to cut rates or not. So you say, OK, I think they’re going to cut rates and as a result, the stock market’s going to rally and then they cut rates in the market. Thanks.

22:05
That’s the kind of the event that I think we’ll have on Election Day. Do I think that your trading really needs to be focused on it right now? I personally don’t think so.

22:14
I’m not giving it 2 licks of a thought come election week, come Monday, Tuesday, I might be looking at it from a swing training standpoint. Do I really want to buy the stock ahead of an election where there’s probably going to be a much bigger swing that I don’t really know what the ultimate outcome is.

22:29
Last couple of elections, it’s had a positive bias to it. So there’s there’s a chance that regardless of who’s elected, the market will go up.

22:36
And how many times have we seen that before where good news is good news and bad news is good news. And the same could be said about the election. Whether Trump or Harris wins, the market will still go up.

22:42
If you enjoyed this podcast episode and there’s a possibility that you didn’t, but if you did leave me a five star review, I would appreciate that. Again, my goal was not to to drive home or advocate for a candidate, but to talk about how this election can impact your swing trading.

23:01
So if you enjoyed it, leave me a five star review on whatever platform you’re listening to me on.

23:09
Also, make sure to check out swingtradingthestockmarket.com. I think you guys will really like it.

23:13
For those who haven’t signed up yet and keep sending me your questions, ryan@shareplanner.com is my e-mail address.

23:19
I’m the only one that reads those emails. I’m the only one that has access to it.

23:22
So check it out. Let me know what’s giving you problems, what’s troubling you.

23:27
Love to hear from you and make a podcast episode out of it. Thank you guys, and God bless.

23:33
Thanks for listening to my podcast, Swing Trading the Stock Market. I’d like to encourage you to join me in the SharePlanner Trading Block where I navigate the stock market each day with traders from around the world. With your membership, you will get a seven day trial and access to my trading room including alerts via text, e-mail and WhatsApp.

23:54
So go ahead, sign up by going to shareplanner.com/trading Block. That’s www.shareplanner.com/trading-block and follow me on Shareplanners, Twitter, Instagram and Facebook where I provide unique market and trading information every day.

24:05
You have any questions, please feel free to e-mail me at ryan@shareplanner.com. All the best to you and I look forward to trading with you soon.