Gold Predicts a Harris Victory By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - The S&P 500 has only had a win streak like this 14 times in 35 years...
- Why it's a buy signal, especially for the long haul...
- We finally have Harris policies to talk about, and this one's a doozy...
- The gold price chart is the only response we need to see...
- The most important thing to understand about AI for 2025 and beyond...
I'm happy to wipe this egg off my face...
On Friday, we observed the S&P 500 was set to open lower, which would snap its then-6-day win streak. We even shared our analysis on what could've happened next (spoiler alert: snapping a 6-day streak is, believe it or not, incredibly bullish).
But as any trader knows, markets don't much care what you've written or what you want them to do. They'll do what they will, often against even your most reasonable desires.
And so the S&P 500 closed up on Friday, sealing a 7-day win streak.
Then it did it again on Monday.
So we now have an 8-day win streak on our hands.
This is really something. An 8-day win streak has only happened 14 times in the entire life of the S&P 500 ETF (SPY). An event so rare is worthy of close study... especially when stocks feel so white-hot right now.
Let's look at the forward returns of SPY for one week, one month, three months, six months, and one year after this landmark win streak: | Time frame | Win Rate | Average Win | Average Loss | Overall Average | | 5 days later | 73.30% | 1.10% | -1.10% | 0.50% | | 1 month later | 78.60% | 1.60% | -1.50% | 1.00% | | 3 months later | 85.70% | 3.90% | -0.90% | 3.20% | | 6 months later | 75.00% | 7.10% | -6.20% | 3.50% | | 12 months later | 77.80% | 27.40% | -9.60% | 7.60% |
Remember, this has only happened 14 times before. And as I write, stocks are down on the day, so it seems that this streak has met its end.
But just look at the results. Three months later, we see the highest win rate (85.7%) and an average return of 3.2% – counting both wins and losses. Not bad considering the long-term trend in the stock market overall, which goes up about 9%, on average, in an entire year.
The shorter-term returns (five days later and one month later) are also pretty solid, though the next five days see the weakest win rate.
Looking out further though, things are really mixed. By the time you get to six months after an 8-day win streak, you get a win rate of 75% and average returns of just 3.5%, just barely better than the forward three-month return. One year out, and average returns are only 7.6% with a 77.8% win rate. So, that wouldn't beat the market benchmark.
But if you look at the average winning trade result, you see forward gains of more than 27% – almost triple the annual average.
We have to keep in mind that stocks climb higher most of the time – as this data proves. Even after huge win streaks, brief corrections tend to just precede bigger forward gains.
There's about a 78% chance that one year from now, stocks could be more than 27% higher. The path to get there might be bumpy, as the data shows. But odds are strong we see a higher stock market in 2025, both in spite of and broadly because of this rare win streak. What we can learn from the Harris policy blitz... A couple weeks ago, when Vice President Kamala Harris became the replacement Democratic candidate for president, I sought out her policy platform so we could glean some insights on what a Harris presidency would entail.
Only problem: there was none... and there still is none.
Going to the Kamala Harris for President website, we find no policy platform or goals – as we believe customary to include in such a place. We find only biographies of Harris, her running mate Minnesota Governor Tim Walz... and quite a few donation buttons.
So until last week, there was really nothing to talk about outside of politics.
That has changed. Harris introduced two key policy proposals. One of which any student of economic history would find unacceptably dangerous... while the other actually has some merit.
We'll save the latter policy – housing subsidies – for Friday's digest.
Today, I'd like to talk about Harris' idea of going after "price gouging" in the food industry to help combat food inflation.
This was met with near universal dismay – at least from my crowd, market observers – and for good reason.
Let me just say, as the husband of a Caracas-born Venezuelan who lived through the final years of Hugo Chávez, I've heard plenty about what happens when you try to limit prices at grocery stores and food manufacturers.
She recalls waiting in line for her allotted two tubes of toothpaste and two pounds of rice – plenty for just her and her mother, but a far greater struggle for larger family units.
Soon, empty shelves abound... And not long after, scores of grocery stores out of business.
That's because when unstoppable inflationary forces are met with nonsensical government intervention, you are forced to sell certain foods at a loss. The loss grows as the value of the currency falls.
This is, obviously, untenable. The incentive to produce foods with artificially limited sale prices evaporates as the cost to produce them rises past that threshold. To think this idea is even being floated in the United States would be laughable if it weren't so scary.
Further, the plain fact is that grocery stores already operate on razor-thin profit margins.
Costco (COST), Walmart (WMT), and Kroger (KR) are the largest publicly traded grocers in the U.S. The thickest profit margin, Walmart's, is still less than 3%. Kroger's, which doesn't offer as many other non-food goods as the other two, runs just a 1.4% profit margin. This chart from a particularly insightful analyst I follow, Lyn Alden, tells the tale: 
Food producers like Tyson (TSN), Pepsi (PEP), and General Mills (GIS) make higher margins, but they also haven't changed much in the last 20 years: 
Point is, this price-control policy is inherently flawed and would crush the most important industry in the world.
It also assumes great ignorance on part of the voter to succeed. That's a smart tactic, to be honest.
But while many voters may not have read up on macroeconomics, many investors certainly have. So we should not be surprised whatsoever to see that the broad market response was to bid gold up 3% in the three days since Harris officially announced the idea. 
This tells us that not only are investors preparing for a Harris victory, they're preparing for a Democratic House and Senate that can push these policies through. And, naturally, they're preparing for these policies to do untold damage to the U.S. dollar.
Longtime investors in gold, upset as they might be about this policy, should be happy with the price action. While gold has not yet passed its inflation-adjusted all-time high, which Justice Clark Litle pointed out in TradeSmith Decoder is about $3,100, new highs in gold are generally bullish.
Let's go ahead and run the same analysis on gold that we did for stocks above – only this time, we'll assume you bought every time gold made a new high... which has happened 250 times since 1990. | Time frame | Win Rate | Average Win | Average Loss | Overall Average | | 5 days later | 64.70% | 1.70% | -1.60% | 0.50% | | 1 month later | 51.10% | 4.50% | -30.20% | 0.70% | | 3 months later | 65.20% | 7.50% | -4.60% | 3.30% | | 6 months later | 75% | 10.40% | -6.70% | 6.10% | | 12 months later | 63.60% | 19.80% | -4.40% | 11% |
On average, when gold charts a new high, it has the highest rate of rising on a six-month basis. It also has the highest annualized returns on this time frame, both for winning and average trades.
In the short term and longer-term though, we see some greater headwinds. Gold tends to stall out in the immediate weeks after a new high. Similarly, it gives up some performance on the longer term, with a 63.6% win rate after 12 months and an average return of just 11%.
I saw a few cherrypicked claims on social media over the weekend that gold has outperformed stocks over the long term. That's true over the last 20 years – because of how the dot-com bubble burst and gave way to gold gains. The '70s was also a better time to own gold than stocks. But on other longer-term measures, stocks beat gold just about every time: 
Does that mean gold is a bad asset? Absolutely not. It's great to have especially in the wake of weak economic periods in the U.S., which we might currently be in. I'm just saying don't go all-in because some gold bug found a convenient time frame to measure. Speaking of big policy ideas that could shake things up... How about universal basic income (UBI)?
If we were all to enjoy UBI, there'd have to be mass redistribution of wealth on a scale this country has never seen before.
So... where would that wealth come from?
Well, the idea would be that it come from the profits of artificial intelligence (AI) companies.
But to generate those profits, corporations have invested billions into AI technology. Soon, it could be trillions.
How happy would those corporations then be to just hand over the profits to the government for its UBI program?
And while they're still in the heavy R&D phase... what about the debt they're taking on? The years of lower earnings along the way?
What happens to the companies' share prices – and, thus, to investors like you – when the government takes those profits for redistribution?
That's just one theoretical example of how careful investors have to be when assessing technology investments.
But in the big picture, we're really excited about the potential of artificial general intelligence (AGI).
And over at our sister company InvestorPlace, their resident macro expert, Eric Fry, is preparing a series of reports on that very topic.
Subscribers of his trading service The Speculator will get those later this week. But the rest of us can tune into his Road to AGI Summit on Thursday, where he'll share his No. 1 stock idea for investing in AGI. Additionally, he'll be delivering his "futureproof" blueprint to prepare for this rapidly evolving landscape.
Eric believes that AGI is reaching a point of no return for developing AI technology – he's holding this event so viewers can stay ahead of this coming technological revolution.
Eric will provide all the details during his Road to AGI Summit tomorrow, Aug. 22, at 1 p.m. Eastern.
Click here to reserve your seat. To your health and wealth,  Michael Salvatore
Editor, TradeSmith | 
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