Wall Street Expert Jay Woods: Market 'Doesn't Care About Your Politics'

Joining me now with more is Jay Woods, he's Chief Market Strategist at Freedom Capital Markets. Jay, good to see you this morning.

Yeah, happy election day.

That's right. Happy election day. What are you watching when it comes to the races? Do they matter to the stock market?

I I'm watching to see these commercials end and to get back to some normalcy. Do they matter for the market? Historically they don't. Uh there is a lot of noise and rhetoric built into the election, but when we look back through a longer lens, it doesn't matter. Will it impact a few different sectors? Yes, over time it will. But 19 out of the last 19 midterm elections going back to 1950. The market has been up six months and 12 months later, 19 out of 19 times. So,

no matter what happens, whether there's a double change, uh in both the House and the Senate or there's no change at all, uh the markets tend to just do fine. We're up six months and 12 months later. We're heading into the seasonally strongest part of the year, uh those six months, November to April.

And in an election cycle, the presidential cycle, the third year of a presidential term is one of the strongest. So, uh, we have the seasonal factors. Now, there is an X-factor this time. Uh this president has been a little volatile, but we have stats on what we did under Trump 1.0. We did sell off pretty dramatically after the midterms in 2018 and that was more self-induced a trade war with China, uh yelling and screaming at Jerome Powell. Remember Jerome and and the Fed, uh we were raising rates. Uh but we quickly recovered and six months later, we were higher. So there is a lot of angst as we go into this.

The war is a major question mark. Uh, and short-term, I'm seeing some technical breakdowns, but six months from now, we're going to look back and say if there was a dip, it was probably the best time to buy, no matter how fearful or how crazy the rhetoric gets. The market is in a position as this dip happens to probably be bought and should be bought.

What is the strength that makes you confident in buying the dip if we do see a pullback?

Yeah, well, right now the strength is earnings. Uh you know, we're we're talking about stocks, Apple today, uh down after a stellar quarter, but we're nit picking when it comes to these big tech names. Uh, Apple they say has 36 PE is too high, but meanwhile Nvidia is historically low. Uh, they're looking at free cash flow in the case of Amazon, in the case of Alphabet. Apple, it was a margin story. Pantier, which has been trading up going into earnings is now under a lot of pressure after a phenomenal guide. So there's a psychology, uh maybe the best is behind us and I believe that is absolutely false and these technology names are technically breaking down but they're getting to levels where we want to buy this dip. But when technology falters, it has a ripple effect throughout the rest of the market because it's the heaviest weighted sector out there. So,

thankfully, what we've seen is rotation and we're seeing staples break out to 52 week highs. Materials look fantastic. Energy continues to lead, not the sector we want to lead, but uh we're still seeing strength there. So the market overall, the whole of the stocks, the equal weighted index is doing great, but now technology is getting battered. The question is, will the rest of the market sell off and follow technology down or will this rotation continue and we get that bounce in technology? I think at the end of the year we'll get this bounce, but between now and the next three or four weeks, it could be a little uh choppy, choppy waters ahead.

How does Apple's results last night fit into this technology picture?

Yeah, it it's frustrating. If I was an Apple shareholder and I saw those results, I'd be like, what more can we do? Uh they they knocked it out of the park. Uh iPhone sales still uh very robust, uh still right in line, uh the App Store services, record quarter for them. Uh the you know, the new CEO, his guide was was solid, but we don't have that new product. uh and the margins are down a little bit because memory chip prices have gone up. So, if I was an Apple shareholder long-term, I'd shake this off, I wouldn't worry about it. If I was looking to get into Apple, I think if it gets to this 300, 310 level, you get a nice technical opportunity to buy this stuff.

What are you watching for when it comes to AMD's results that we see on tap?

Yeah, I it's another story is, hey, are the fundamentals going to be good? or good earnings is going to be good enough to lift it. It's been under pressure lately. chances are they'll have good earnings and chances are it will probably fall down. Now, if they miss, this is where stocks really get punished. So, I I think AMD is going to have a great quarter and technically, it's getting to a level where it looks very fascinating and I look at a stock like Micron that's been under tremendous pressure. Uh when you look at backlogs, when you look at uh forward guidance, there is nothing saying it deserves to be sold off as much as it has been. So again, I think this psychology, we're selling tech, we're selling winners, stocks have been up tremendously for the year continues and they're rotating into some laggard. That's why the staples have caught a bid and some of these other names that were kind of, you know, left for dead are now coming back to life.

The story is will technology which has been under pressure get that relief rally and start to lead again.

Look, we know that the economy is on the ballot today as voters head to the polls if they haven't voted already, especially when it comes to inflation and jobs, the Fed's dual mandate. We are going to get the jobs report on Friday for the month of October. What matters in that?

Yeah, well, the Fed did nothing at the last meeting. So now we have one meeting left at the end of the year, December 9th, I believe, and it's expected that they'll hike. So what data will they look at? Well, the inflationary data continues to rise where oil prices have had a tremendous impact. Now, unemployment, the other part of the dual mandate, it's been stable around 4.2%, but we're not seeing job growth and we're not seeing job deceleration. Uh things are pairing off. The one thing we want to watch with the jobs numbers is wage growth. That is starting to decline.

So if the people in the workforce are starting to make a little less and inflation is starting to go up, that'll be concerning. If unemployment does tick up, then that part of the mandate will have to be addressed. Um and that will put the Fed behind uh the eight ball going into this meeting. Uh I expect 4.2% to be the number in the unemployment uh report and it shouldn't have a big impact. I think reaction initially to this election and possible rhetoric heating up with Iran afterwards are what is going to move this market next.

Can the market continue to rise in 2027 amid higher rates?

Can it rise during higher rates? Yes, as long as the earnings growth continues, I think we'll be just fine. Um so I don't expect rates to rise as dramatically as people may expect. We have one rate hike in say December and maybe two through 2027. but the key is let's get the inflation under control. If we don't do that, then we'll have a bigger problem. But I think when you focus on the 500 companies in the S&P 500, especially those tech names, I think the earnings projections are still there. The demand continues to be strong and the consumer has been resilient, but if this inflation continues, then we'll have some headwinds. So oil is the thing I'll be watching the most and obviously Iran. So it should be an interesting 2027, but the fun fact, third year presidential cycle, the best year under Trump, it was a solid year as well. So maybe it it does that again. But I think the next couple weeks could be rough. Uh so you may want to just watch the market a little like that, uh behind closed eyes and then come back at the end of the year and it should be fine.

Focus on the long term. That's what I'm gathering, Jay. You're saying right here. Jay Woods, Chief Market strategist here at Freedom Capital markets, joining us on election day to break down this market activity at the open. Jay, thank you as always.

That's exactly. Yep.

Thank you.