by A Republican victory is likely in Tuesday’s midterm elections, which would lead to a useful “stalemate” on Capitol Hill, said Bill Baruch, president of Blue Line Futures.
“If the Democrats win this election, and I don’t think they will … then there will probably be more spending, which could lead to higher revenues,” he said. “I don’t think that’s going to happen, so I’m pretty bullish right now.”
He added that the election season is “seasonally bullish” on the market based on historical data.
“Historically, it’s the most seasonally rising time of the year,” he explained. “For six or nine months after the midterms, you want to buy … but you have to see Republicans pick up seats.” Baruch spoke with Kitco News anchor and producer David Lin.
Housing and inflation
The S&P Case-Shiller home price index shows that the rate of increase in home prices has begun to cool down. As the Fed raises interest rates, raises mortgage rates and lowers home prices, Baruch said businesses and individuals are waiting patiently with cash for an opportunity to buy property.
“There are venture capital firms willing to buy houses and property,” he said. “At the same time, I have a lot of clients who are wealthy individuals … and they’re waiting for prices to come down and they have cash.”
Some traders have speculated that house prices will remain high because of these wealthy investors. Baruch said this keeps inflation high.
“Inflation is not going down because there are sticky parts, which are rents,” he said. “I expect that the owner’s compensation will start to come down in the first quarter, but it’s not coming down now, and it’s a third of the CPI.”
Geopolitical risk and gold
After Russia invaded Ukraine in February, the price of gold rose to just over $2,000 per ounce. Baruch emphasized that this is due to gold’s “safe haven” properties.
However, he added that not all geopolitical tensions lead to an increase in the price of gold.
“A lot of times if gold is in an uptrend when a war breaks out, you can actually get a capitulation where people are already long and it’s served its purpose,” he said. “It served its purpose and then made war headlines. Buy the rumor, sell the news.”
Gold is currently near $1,675. Baruch argued that other geopolitical events could affect its price.
“I wouldn’t ban news from North Korea [firing missiles] Friday was a tailwind to what we saw in gold and silver,” he said. “Maybe we’re starting to see something that could happen with China and Taiwan.”
Watch the video above to see Baruch’s oil price outlook
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