Historical Election Playbook, Tactical Problems With Growth Persist

Today in the podcast, three big things you need to know: First, historically, the US equity market tends to have a weak start in Presidential election years before rallying back ahead of the event, while trends tend to turn choppy again in the months around the event itself. 2024 could be different given the unusual circumstances in the upcoming race, but the history is still worth a quick look back. Second, while last week’s mega cap Tech earnings were generally viewed as strong, it didn’t change the fact that the Large Cap Growth trade has tactical problems (i.e., overvaluation, stretched positioning) that need to be resolved. Third, developments in our high frequency indicators were mixed for equities this past week, with improvements in earnings revisions trends and individual investor sentiment, but continued deterioration in trends for US equity funds flows. Overall, we remain concerned that the “breather” in the US equity markets that’s been underway hasn’t fully played out yet, but also consider ourselves to be more neutral than bearish on stocks from here.