Stocks in correction, should bounce back after mid-term elections

Currently, the stock market is back to the same level it was in late June.

Once the mid-term elections are over, so will be the uncertainty and the stock market should be able to bounce back—regardless of who wins.

KTRH's Money Man Pat Shinn said it could be bad for drug company stocks if Democrats take back the House, they could work with the president to agree to go after Big Pharma pricing.

It could be positive for construction companies if the president introduces infrastructure, which would benefit Caterpillar stocks.

He said most of last month’s sell-off was technical—traders who follow the charts—noot fundamentals like earnings or interest rates, or economic growth.

“I’m actually looking for the market to go back up and hit a new all-time high over the next couple of months. The only caveat that I would see would be trade talks with China” said Shinn.

He explained that a pullback in the stock market is five to 10 percent. A correction is 10 to 20 percent. A bear market is a decline of 20 percent or more. Most bear markets coincide with an economic recession.

Shinn said he believes this is a correction and after the mid-term election is over, the stocks will bump back up.

“And, I do not see a recession anywhere on the horizon. In fact, I think we’re probably 12 to 18 months away from something like that,” said Shinn.

He said the track record around mid-term elections for the stock market is very good. Over the last 20 of 21 mid-term elections, the stock market has been positive going into the end of the year.

Shinn said the only surprise last month were with Amazon and Google earnings, not earning what investors expected.

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