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In This Digest:
- Midterm gloom has an expiration date, and this beaten-down AI builder is a bargain
- Three stocks entering seasonally bullish windows after Election Day
- Main Street and Wall Street agree on this cybersecurity stock
The midterm market blues won’t last long…
With just a week to go before the midterms, it’s hard to find anyone who feels good about politics.
Every poll, attack ad, and cable-news panel seems to say the country is headed the wrong way. Nobody knows who’ll control the House or the Senate next year… or what they’ll do with it.
What we do know is that Wall Street hates that kind of uncertainty – especially when so much of the political narrative is around growing public discontent with AI.
And market selloff reflects that.
The tech-focused Nasdaq 100 is at nearly the same level today as it was in mid-May. Nvidia (NVDA), Micron (MU), Alphabet (GOOGL), SpaceX (SPCX), and dozens of other AI stocks are well off their all-time highs.
But that uncertainty has an expiration date: Tuesday, Nov. 3. And once the votes are counted, history shows that stocks tend to rally.
That’s the case Lucas Downey made this week to our Quantum Edge Pro subscribers.
Since 1950, the S&P 500 has been higher in all but three years in post-midterm years. The median return in those winning years is about 12%, meaning half of them gained more than that. Here’s Lucas with more:
Zoom out to the four-year presidential cycle, and the picture gets brighter still. Going back to 1950, the quarter we vote in and the two that follow have been the strongest nine-month stretch of a president’s term.
Sitting through selloffs is tough, but it’s a toll we often must pay for long-term gains. What’s more, opportunities arise when selling is overdone.
Lucas says the recent bearishness is down to nerves, not real issues with corporate America. FactSet projects 29.5% earnings growth for the S&P 500 this quarter. If that holds, it would be the third straight quarter of earnings growth above 25%.
Compare that to the 25-year average of just under 9%, and you see why Lucas isn’t worried.
If you’ve been thinking of selling ahead of the midterms, hold on. The run-up to the midterms has typically been a rough patch for stocks. We’re about to enter a much more seasonally bullish period.
This AI builder is on sale…
While politicians argue about data centers, the buildout hasn’t stopped. Every one of those buildings needs miles of wiring, power lines, and backup generators.
But the companies doing that work are getting sold along with the rest of AI, even though their businesses aren’t slowing down.
That’s put some great businesses on sale, and finding them is what our Quantum Score is built for.
It’s our measure of a stock’s overall strength, rated from 0 to 100. It combines how the business is performing, such as growth in sales and earnings, with how the stock is trading, including signs that big investors are buying. The higher the score, the stronger the stock.
And right now, Lucas likes to see elite-quality stocks with high Fundamental Scores that are oversold. He ran this test across his model portfolio and found some “buy-the-dip” opportunities.
If you’re a Quantum Edge Pro subscriber, you can catch up in full here.
I ran the same test across the rest of the market. And one stock stood out: IES Holdings (IESC).
IESC is one of the companies behind the AI buildout. It designs and installs the electrical and network wiring inside data centers and builds the enclosures that house their backup generators.
Its Fundamental Score is 92.9. That tells us the business is growing fast, with healthy profit margins.
At the same time, it holds a Relative Strength Index (RSI) value of just 28.3. That tells us the stock is oversold.
This is a stock to watch if you’re looking for a way to play the AI boom. It’s an elite-level business that’s selling at a discount – a great combination.
And if you’re a Quantum Edge Pro subscriber, Lucas’s six favorite bargains from his model portfolio, along with his buy-up-to prices, are waiting for you.
These three stocks are entering seasonally bullish windows after the elections…
To find out more about which stocks tend to run higher after the votes are counted, I ran our Seasonality tool across the S&P 500.
It looks at how a stock has performed during the same stretch of the calendar in past years, then flags windows when it has reliably risen or fallen. I looked only at midterm years, and only at bullish windows starting on or around Election Day.
Three stocks stood out. And each sits in one of the biggest themes on our radar.
Texas Instruments (TXN) makes what are called analog semiconductors. These chips translate real-world signals like heat, motion, and sound into digital data for countless electronic devices, from cars to data center servers.
Its seasonally bullish window runs Oct. 29 to Dec. 8. TXN has risen during that stretch in all 11 midterm years dating back to 1982, by an average of 16.5%.
Eli Lilly (LLY) is most famous for its GLP-1 weight-loss drugs. Its Mounjaro and Zepbound GLP-1s account for 65% of its total $23 billion revenue last quarter.
Its seasonally bullish window runs Nov. 2 to Dec. 10. LLY has risen in 10 of 11 midterm years going back to 1982 over that stretch, by an average of 5%.
Seagate Technology (STX) makes the high-capacity hard drives that data centers use for long-term storage. That’s the “filing cabinet” that TradeSmith CEO Keith Kaplan described in his look at AI agents on Oct. 16.
STX’s seasonally bullish window runs Oct. 29 to Dec. 4. STX has risen during that stretch in every one of the last six midterm election years, by an average of 11.1%.
These stocks are strong seasonal ideas to keep in mind as we approach Election Day.
Main Street and Wall Street agree on this cybersecurity stock…
In yesterday’s dispatch, I showed you how AI has eliminated the traditional barriers to cybercrime – expertise and cost.
And the week before, a major software vulnerability discovered by AI (the “PHP” issue you may have read about in the headlines) affected about 70% of the world’s websites.
As AI models get exponentially more powerful in technical domains, the need for strong cybersecurity has been in the spotlight.
That’s making cybersecurity one of the best trades of 2026. The Amplify Cybersecurity ETF (HACK) is up 65.5% so far this year. That’s beating even the gains in the VanEck Semiconductor ETF (SMH), which is up 51.2%.
Owning the best cybersecurity stocks is essential right now. And according to two very different systems, one stock in particular is worth your attention.
Let me explain…
Yesterday, legendary Wall Street “quant” Marc Chaikin sat down with colleagues Andy and Landon Swan to announce their new partnership, pairing the Swans’ Social Heat Score with the Chaikin Power Gauge.
If you’ve been with us for some time, you’ll know the Social Heat Score measures the “purchase intent” of millions of consumers by tracking social media posts, along with web traffic data, search activity… even podcasts.
This isn’t limited to consumer stocks, either. The Swans track business-to-business activity as well.
So if you want to know which companies’ products are hits before they report their numbers, it’s second to none.
And the Chaikin Power Gauge – invented by the 50-year investing legend – confirms that the spending wave is showing up in the books of solid companies that you can feel secure investing in.
It rates stocks on more than 20 factors, including a company’s finances, its earnings, and whether big institutional money is flowing in or out.
When both turn bullish on the same stock, it’s worth paying attention to.
Over a six-year backtest, we found 432 cases where both systems lined up. About 6 out of 10 – 260 of them – saw peak gains of 100% or more.
And right now, it’s flagging cybersecurity stock CrowdStrike (CRWD). It has a Social Heat Score of 79. (Anything over 75 is a buy.)
And Marc’s Power Gauge rates CrowdStrike Bullish. The stock is beating the market, and big money is flowing in. Wall Street analysts are turning more positive. And its earnings performance is strong.
These two indicators flashing on the same stock is a strong signal backing the AI cybersecurity trend.
CRWD is the stock that Marc shared during yesterday’s event.
Marc and the Swans also gave away two other free stock ideas at the event: one to buy and one to avoid. Catch up right here.
To building wealth beyond measure,
Editor, TradeSmith Daily
Disclosure: At the time of this writing, Michael Salvatore owned shares of GOOGL and SPCX.
