by Jason Bodner
September 9, 2026
““Give me a lever long enough, and a fulcrum on which to place it, and I shall move the world.”
— Archimedes
Archimedes was describing a law of physics, but he was also describing the political calculus of midterm election years. In this case, oil is the lever, and the Strait of Hormuz is the fulcrum. Shipments of oil through the Strait impact the price of oil going into the November elections that could “move the world.”
This same calculus impacts market volatility, and it may also be creating the incentive to resolve it.
As September begins, midterm election anxiety is rising. Bond yields are elevated. Oil is above $90. Some growth stocks are getting hit. Investors who felt comfortable in June suddenly are now uneasy.
None of this should be surprising. Midterm election years are the weakest of the four-year presidential cycle, averaging 5.8% returns since 1926 with average intra-year drawdowns of 16%. But this is a story of two-markets: The first nine months average in midterm years sees declines of about 1% as uncertainty builds, but then the market takes off like a rocket from late October to the middle of the next year.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Midterm election years have averaged a phenomenal 7% gain in Q4 with an 88% positive rate, soaring on schedule once the pre-election uncertainty fades. Since 1950, the S&P 500 has averaged a 36% one-year forward return from its midterm-year lows. The current choppiness is the price of admission.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Fear Rules…Until Certainty Returns
Here is how the fear mechanism works. The Strait of Hormuz handles roughly one-fifth of global oil trade. Disrupt that flow and oil rises. Gasoline follows. Headline inflation rises. Bond investors demand higher yields. The Fed feels pressure even though monetary policy cannot produce a single barrel of oil.
Higher yields pressure growth stocks because future earnings get discounted at a higher rate. This week the 30-year Treasury hit 5.34%, its highest level since 2007. Japan’s 10-year bond touched a 30-year high. UK gilt yields hit their highest level since 1998. But fear works both ways. If Hormuz normalizes, oil falls, inflation fears ease and long-end yields can compress. Secretary Bessent can then accelerate Treasury buybacks, adding more downward pressure. The unwind could be as fast as the build-up.
President Trump does not want his midterm legacy to be losing the Senate and possibly the House, creating a lame-duck two-year halt to his controversial Presidency. But resolving Hormuz removes the oil shock, cools inflation fears and gives the bond market room to breathe before November.
The Venezuelan deal announced earlier this year, securing a 35% equity stake in 65 billion barrels of reserves, suggests the strategic chessboard was already being set before Iran escalated.
What the Data Says Now
Last Tuesday (September 1) was the week’s most instructive session, with 45-inflows and 133-outflows on some real volume. The 1-day ratio of 25.3% inflows was the lowest since the Aschenbrenner blow-up.
Context matters. In March, rising outflow caused a collapsing Big Money Index (BMI), from 65% to 42% in three-weeks, and each spike brought more selling. Then March 20 brought capitulation, with 337-outflows, the biggest selling day of 2026, marking the exact low. A month later the S&P 500 was up 9%.
Tuesday wasn’t like last March. The BMI was 66%. At these levels, outflow spikes historically look more like selling exhaustion than something worse. Here’s how outflows aligned with troughs since March:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The market is rotating, not divesting. Wednesday and Thursday supported that view. Buyers returned, the NASDAQ gained 1.4% on Thursday, and the BMI stabilized above 66%.
ETF flows tell the rotation story. Commodity ETFs dominated inflows across crude oil, agriculture and natural gas. Tuesday also saw 48-bond ETFs register outflows across maturities, credit qualities and geographies. Over three-days there were 70-bond ETF outflows involving 51-unique funds.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
To me, that looks less like rotation and more like a washout. In stocks, extreme outflows have repeatedly marked local troughs – just like March 20th. The same logic may apply here. When virtually every corner of fixed income gets sold at once, a lot of the sellers who wanted out may have just gotten out.
Sector flows confirmed the repositioning. Energy led at 52-net inflows, its strongest reading in months. Healthcare extended its streak to eleven-straight weeks of net inflows at plus 29. Technology stayed positive at plus 7. Selling concentrated in Industrials at minus 62, Discretionary at minus 53 and Real Estate at minus 32, exactly the rate-sensitive and cyclical areas taking the brunt of higher yields.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
If Hormuz normalizes and the oil shock fades, those areas can reprice themselves very quickly.
The Earnings Backdrop
Friday’s jobs report added to the puzzle. The economy added 162,000 jobs in August, nearly triple the expectations, but consider that 42,000 jobs came from public education, reversing July’s 45,000 decline. Still, the message is clear: The economy is stronger than expected, even with rising oil prices and rates.
Corporate America says the same thing. With 97% of S&P 500 companies reported, 86% beat earnings estimates and 77% beat revenue estimates. Blended earnings growth exceeded 52%, the highest growth rate since Q2 2021 and more than double the 23.1% expected at the end of quarter, on June 30, 2026.
Ten of 11-sectors beat earnings expectations. Net profit margins hit a record. For Q3, positive guidance is running nearly 2-to-1 over negative guidance. And the forward P/E is 19.6, below the five-year average of 19.9. In other words, businesses are producing record earnings while the market has gotten cheaper.
The AI buildout has not changed, either. Nvidia CEO Jensen Huang forecast 70% revenue growth for fiscal 2028, while the other big firms that control more than 90% of global DRAM all warned of supply shortages through 2028, so the outlook for the businesses hasn’t changed. The narrative has.
Volatile Septembers in midterm years always feel uncomfortable. They also end. November and December of midterm years are historically among the strongest months of the four-year presidential cycle. This time, the calendar and the political incentives may be pointing in the same direction.
The lever works both ways. The fulcrum hasn’t moved, but the applied force is about to change direction.
As the Tao Te Ching says, the nature of things is to cycle. Any direction that looks permanent rarely is.
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Friday’s Jobs Report and Other Indicators Look Strong
Income Mail by Bryan Perry
The Opponents of Data Centers Just Don’t Get It
Growth Mail by Gary Alexander
What Happened to America’s Work Ethic?
Global Mail by Ivan Martchev
The President is on a Collision Course with the Fed
Sector Spotlight by Jason Bodner
Applying Leverage to the Upcoming Elections
View Full Archive
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Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation and distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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