Daily Stock Market Articles

“A Big F-ing Deal”
Tue, Apr 2, 2024

After Monday night’s announcement from the Centers for Medicare and Medicaid Services (CMS) that 2025 payment rates for Medicare Advantage plans would effectively be equal to a 0.16% decline relative to this year, managed care stocks plummeted in after hours trading and into the trading session on Tuesday. By the time the closing bell rang on Tuesday, the S&P 500 Managed Care sub-industry fell more than 6.5% compared to the S&P 500’s decline of less than 1%. On a relative basis, managed care stocks underperformed the S&P 500 by 5.6 percentage points for the day. As shown in the chart below, today’s underperformance of the industry relative to the S&P 500 was one of the largest since the Affordable Care Act was signed into law on 3/23/10.



Tuesday’s weakness in managed care stocks is hardly the beginning of a new trend. Since hitting a peak in late October 2022, just as the broader bull market was getting started, the managed care industry has been moving in the opposite direction. Just this year, as the S&P 500 has essentially closed at 52-week highs multiple times per week, the managed care industry is right near 52-week lows.



We can’t think of a better way to illustrate the inverse correlation of managed care stocks relative to the S&P 500 over the last 18 months or so than the chart below. While it has been 370 trading days since the S&P 500’s bear market low in October 2022, the managed care sub-industry has gone 355 trading days without trading at a 52-week high, which is the longest such streak since the ACA was signed into law. As then Vice President Biden “whispered” to President Obama at the time, “This is a big F____ing deal.”

 

April Ends Best Six Months #1 DJIA

April is the final month of the “Best Six Months” for DJIA and the S&P 500. April is #1 DJIA month by average performance since 1950, 2nd best S&P 500 month and 4th best NASDAQ (since 1971).

In election years, performance and rank softens slightly, 3rd best DJIA and S&P 500 month, 6th for NASDAQ, but remains bullish. April is the last month of DJIA and S&P 500 “Best Six Months.” NASDAQ’s Best Months run through June. Election Year Aprils are up 1.3% on average for S&P 500.

 

A Blockbuster Payroll Report Suggests the Economy Is Far From Recession


We’ve been getting good news about the labor market in recent months – job growth has been strong, and the unemployment rate has been below 4% for 26 straight months (the longest streak since the late 1960s). However, there were some concerns at the edges if you looked hard enough. The March payroll report set aside a lot of these worries, as it was positive across the board.

Payroll growth actually picked up in recent months. The economy created 303,000 net new jobs in March (well above expectations for a 214,000 increase), and with positive revisions to January and February, payroll growth averaged 276,000 a month in the first quarter. Payroll growth averaged 212,000 in Q4 2023, and for further perspective, it averaged 166,000 in 2019.



A lot of the employment growth over the past year has come from non-cyclical sectors like health care, education, and government – but only because these sectors lagged the initial recovery in 2021-2022. However, cyclical areas are bouncing back. Payroll growth in the goods-producing sector, along with retail trade and leisure and hospitality, saw 109,000 jobs created in March. That by itself is almost enough to keep up with population growth.

The unemployment rate had risen from 3.4% last April to 3.9% in February, raising concerns. The unemployment rate comes out of the Bureau of Labor Statistics’ “Household Survey”, which is smaller and more noisier than the “establishment Survey”, which is where the payroll data comes from. Employment gains had lagged in the household survey in recent months, but March saw a reversal. As a result there was a welcome pullback in the unemployment rate to 3.8%. That’s still higher than a year ago, but not by much. Moreover, higher immigration is increasing the supply of workers and there’s a lag between when new immigrants enter the workforce and how quickly they find jobs (higher immigration has also a key reason why real economic growth has exceeded expectations). In any case, I prefer to look at the “prime-age” employment-population ratio, which tells you how many people in their prime working years (25-54) are employed relative to the population. The measure is at 80.7%, exactly where it was a year ago and higher than at any point between July 2001 and February 2020. That by itself tells you how strong the labor market and economy is, with a higher proportion of prime-age adults working now than we saw over the last two expansions.



But does a strong labor market raise concerns over inflation?
A strong labor market would typically raise the prospect of higher inflation. The logic is that a hot labor market would result in higher wage growth, which would push demand for goods and services higher, resulting in higher inflation. However, wage growth has been easing since 2022, and the story hasn’t change despite the recent acceleration in hiring.

If you look at overall income growth across all workers in the economy (a product of employment growth, hourly wage growth, and hours worked), that’s running at a 6.1% annualized pace over the last three months. That’s stronger than what we saw pre-pandemic, when aggregate income growth averaged about 4.7% annualized, but well off the red-hot levels of 10%+ in 2021-2022 (when inflation surged).



Moreover, there are two notable things that pop out when looking at aggregate income.

One, income growth is running ahead of inflation. After adjusting for inflation, aggregate income rose at an annualized pace of about 2% in the first quarter (assuming the Fed’s preferred inflation metric, the personal consumption expenditures index, rose at a 4.1% annualized pace in Q1). That’s positive for consumption, and the economy.

Two, hours worked has been running flat recently (the green bars in the chart above). At the same time, GDP growth in the first quarter is estimated to clock in around 2.5% (using the Atlanta Fed GDP Nowcast). That means labor productivity continues to run strong, as workers are producing above-trend output while working the same amount of hours.

Higher productivity was a key theme in our 2024 Outlook, and it’s encouraging to see signs of that continuing, mostly thanks to a strong labor market that is drawing more workers in (including immigration). As we’ve written in the past, productivity growth allows for strong wage growth with muted inflation. Which is positive in two ways:

• Some of the productivity growth is taken by firms in the form of margin growth. (Firms don’t pass all the productivity gains to workers, much as we’d all like our employers to do that.)
• Muted inflation even in the face of a strong labor market means the Fed can start to ease rates, which will potentially fuel investment and provide a further boost to productivity.

With respect to potential interest rate cuts by the Federal Reserve, the strong labor market and economy doesn’t preclude cuts. Of course, the inflation data needs to cooperate, but we do expect inflation to pull back in March and April, reversing the firming we saw in the first two months of the year. The good news is that there’s nothing in the economic data that suggests we’re on the verge of a labor-market induced inflation surge. Yes, some commodity prices are rising amid Middle East tensions, but as we’ve seen in the recent past, these are volatile and prices can reverse just as quickly.

 

Inflation, Poor Sales, and Fewer Jobs
Tue, Apr 9, 2024

The US data calendar has been light to start the week. Today, the only release of note was the NFIB's reading on small business sentiment. While the index was expected to tick up to 89.9 from 89.4 in February, it instead dropped down to 88.5. That is the weakest reading since December 2012.



Given the weak headline number, breadth in this month's report was terrible. Of the inputs to the Optimism index, only two rose month-over-month. Of those falling categories, one of the more standout declines was an 8-point drop in expectations for real sales. While there have been even weaker readings over the past couple of years, that monthly decline ranks in the bottom 5% of all months on record.



The survey also questions small businesses on what they consider to be their largest problems. These results echoed the deterioration in expectations for higher real sales. As shown below, the percentage of respondents reporting poor sales as their biggest issue has been on the rise. While 8% is far from a historically elevated reading, it is up significantly from the past two years.



Poor sales are not the only concern that ticked higher. The first three months of 2024 have seen hotter-than-expected CPI prints (which we discuss market responses in tonight's Closer), and small firms are increasingly concerned with higher prices. As shown in the first chart below, a quarter of firms noted inflation as their single biggest problem. That erases any improvement in the reading since last May. Additionally, while the increase was much less pronounced, the higher prices index likewise ticked up. That returns this index to the top decile of its historical range.





In today's Morning Lineup, we discussed the labor market indicators' weakness as well as the weakness in capex plans per this report's data. As shown below, each of these categories deteriorated in March with the exception of compensation (both actual and planned). The most significant decline has been hiring plans which is now down to the lowest levels since the spring of 2020. Prior to 2020, the last time the index was this low occurred in late 2016. While small businesses have cut back on hiring plans, they are also reporting job openings as hard to fill at similar levels to before the pandemic.

 

Best Six Months Rally Respite Underway April Tracks Election Year Seasonality

It’s been a banner “Best Six Months (BSM)” (November-April) for the Dow and S&P 500. From our Seasonal MACD Buy Signal on October 9, 2023, through our April 2, 2024 Seasonal MACD Sell Signal), DJIA gained 16.6%, S&P 500 20.1% – double the historical average BSM gains. These big gains have not left much on the table until later this year.

Risks are more elevated now. Sentiment continues to run high. Valuations are extended. Geopolitical tensions have not eased. And persistent inflation pressures have the Fed in no rush to cut rates. As the election campaign rhetoric heats up and the Best Six Months comes to a close, we are shifting to a more cautious stance.

As you can see in the chart of April 2024 compared to election year Aprils since 1950 the market is tracking the softer election year April pattern

 

Are Democrats or Republicans Better for Stocks?


“George Washington was the only president who didn’t blame the previous administration.” -Source unknown

How’s that for a title for a blog? Now that I have your attention, let’s talk a little bit about election years.

We are getting the question of who is better for stocks a lot lately and given the election coming up, this question isn’t going away. Starting with the 82nd Congress in 1951, we found that the S&P 500 was up 11.5% on average when a Democrat was in the White House versus 7.1% for a Republican. But is it that simple?



What about Congress? You could argue if a party controls Congress they yield more power than holding the White House. When the Democrats controlled both the House and Senate, the return drops to only 6.7% compared with 11.0% when Republicans control both chambers of Congress. But the real gains tend to be when things are split, as the returns jump to 14.5%. Gridlock (or compromise) is good.



I shared those charts and more in 16 Charts (and Tables) to Know This Election Year. That was one of our most read blogs all year, so be sure to save that link and re-read it a few times over the course of this election year.

Now here’s one that really caught my attention recently. According to our friends at Bespoke Investment Group, if you invested $1,000 in the S&P 500 when Eisenhower took office in 1953 and invested only when a Democrat was the president you’d have $61,800 today versus $27,400 when only investing during a Republican presidency.



As appealing as that might be to some, if you simply ignored who was in the White House and invested that same $1,000 in the S&P 500 in 1953 it would be worth close to $1.7 million today!



All I can say is wow! I’ve done this for close to 25 years now and I’ve seen so many investors do things purely based on their political beliefs. How many disliked President Trump, rooted for a recession and bear market, only to see 401k balances soar? Today many aren’t happy with President Biden and are avoiding stocks again, yet many portfolios are near the highest they’ve ever been if they stayed invested. Same story with President Obama—if you weren’t invested you missed a great time to buy stocks quite cheaply when he took office in January 2009, only to see stocks soar the next eight years.

The bottom line is don’t let your political beliefs influence your investment decisions.

I will leave you with this really interesting chart from Libby Cantrill, Head of US Policy at PIMCO, on potential winners and losers this coming November. Take note, these views aren’t the Carson Investment Research teams views, but I think Libby is one of the best out there and it is worth thinking about as we move closer to the election.

 

Is It Time to Worry About Inflation Again?


Short answer: likely not. Make no mistake, inflation ran hot in the first quarter, especially relative to the fourth quarter of 2023. The March Consumer Price Index (CPI) report was an unwelcome surprise. Both headline and core inflation (excluding food and energy) came in above expectations. Headline inflation is up 3.5% from last year, and as you can see from the solid line in the chart below, it looks like inflation progress has stalled since June 2023.

But the breakdown also tells us it’s really shelter inflation that is behind the stall. Inflation within every other major category has eased relative to last June – including food prices, vehicle prices, and even things like household furnishings, apparel, airfares, and hotels prices. Gas prices have risen this year, but we’re a long way away from the energy price surge we saw in mid-2022.



I’ve discussed shelter inflation ad nauseum over the past year and half, and so I’ll skip the details. Suffice it to say, official shelter inflation has a significant lag to rents in the private data. Shelter inflation matters a lot for CPI, as it makes up 35% of the basket. Rents of primary residence account for 8% of that, while “owners’ equivalent rent” (OER) accounts for 27%. OER is the “implied rent” homeowners pay, and it’s based on market rents as opposed to home prices.

What’s strange is that the US is the only major country that includes a concept like OER in its CPI basket. Other major countries, including in Europe and Canada, include rental inflation but not OER. The Bureau of Labor Statistics calculates an equivalent measure for the US – called the “harmonized index of consumer prices” (HICP), which you can think of as CPI excluding OER. I find this a useful gauge of inflation because we don’t have to throw all of shelter inflation out, as HICP includes regular rental inflation but excludes the problematic OER. It’s also helpful for comparing US inflation to other countries’ on an apples-to-apples basis. US HICP is up 2.4% since last year, and core HICP (ex food and energy) is up just 1.9%. In March, core HICP rose just 0.2%, equivalent to an annualized pace of 2.3%. This should tell you that underlying inflation is not worrisome.



Unfortunately, regular CPI is what is widely followed in the US. The good news is that shelter inflation is easing (including in March), but it’s happening ever so slowly. Apartment List’s national rental index has been in a year-over-year decline for 10 straight months. Official shelter inflation may not get as low as this, but there’s likely more easing to come in the months ahead.



Shelter was not the only upward force on inflation in March. Core inflation (excluding food and energy) rose 0.36% in March, and shelter contributed 0.19%-points of that. But another 0.09%-points came from motor vehicle insurance, which makes up under 4% of the core CPI basket. Together, shelter and motor vehicle insurance contributed 78% of the core CPI increase in March. Motor vehicle insurance rose 2.6% in March and is up 23% since last year. A big reason is that cars and trucks are pricier now, and so insurance is getting more expensive. Repair costs are also rising – for example, a bumper used to be a cheap replacement part, but not anymore because it’s got advanced electronic sensors in there.

The strong economy is not translating to higher prices
Outside of shelter and motor vehicle insurance, most other categories are seeing disinflation or an outright fall in prices. That’s despite strong household consumption. Whether it’s food prices, commodities outside food and energy (like vehicles, household furnishings and appliances) or services like hotels, airfares, personal care services, theater and concert admissions, and car and truck rentals.

As I wrote last month, one category I like to follow is inflation within food services, i.e. “full service meals and snacks.” It’s tracked core inflation closely even though it’s not included within the core inflation basket. I find it useful because full-services restaurant meals combine several elements that go into inflation, including:

• Commodity prices – food, but also energy (which is used for transportation, amongst other things)
• Wages – for restaurant workers
• Rents – of restaurant premises

Inflation for restaurant meals has eased a lot over the past few months. It was up just 3.3% from last year, which is in-line with what we saw in 2019. At its peak in August 2022, inflation for restaurant meals was as high as 9%. The current level tells me that underlying inflation is quite benign.



Listen to consumers
Fed Chair Powell has said that one cause of spiraling inflation is rising inflation expectations, which is what happened in the 1970s. If consumers expect higher inflation, they tend to demand more wages and that puts more pressure on prices for goods and services. He can rest easy, because consumer expectations of inflation – both over the next one year and the next five years – have come in below 3% for three months straight (using the University of Michigan consumer survey). That’s not far above pre-pandemic levels, when expectations were running around 2.5-2.8%.

Consumer inflation expectations are not particularly accurate in forecasting future inflation. (It’s hard even for the Fed.) But I find it useful as a gauge of current inflation, because consumers usually project current inflation out into the future. And right now, consumers are saying inflation is running only slightly above where it was in 2019.



Rate cuts get pushed out
The firm inflation data in Q1 likely pushes out the timing of the first interest rate cut by the Fed, perhaps to July at the earliest, if not September. There’s even less urgency to cut because the labor market continues to run strong. At the same time, there’s a lot more inflation data to come between now and June, let alone July. The underlying data points to core inflation hitting the Fed’s estimate of 2.6% by the end of the year – and based on their own projection, that’s good enough for the cuts.

As Powell noted in his press conference in March, they didn’t sound victory bells when inflation really eased in the second half of 2023, and they’re not going to panic based on the Q1 data. The disinflation trend is likely on track, albeit with a few bumps along the way.

 

All Good Things Come to an End
Fri, Apr 12, 2024

The rally from the October lows through the end of March was enough to make any bull giddy, but April has brought a decidedly different market mood. Stocks have hit the pause button, and in many cases the rewind button. While the S&P 500 was comfortably above its 50-day moving average (DMA) from early November through the end of March, it has been creeping towards that level all April, and as of Friday afternoon, it even dipped slightly below.



If the S&P 500 closes around these levels this afternoon, it will snap a streak of 109 trading days of closing above its 50-DMA. This streak, though impressive, wasn't record-breaking, but since 1953, only ten were longer, with the last exceeding it coming in 2011. (See chart below for historical context)



The chart below shows where each sector, the S&P 500, Nasdaq, and Russell 2000 are trading relative to their 50-DMAs now versus where they were trading on 3/28 when the S&P 500 last closed at a record high. Not surprisingly, every sector and index is less extended now. Nearly half of the eleven sectors have also broken below their 50 DMAs, while three others (Industrials, Materials, and Technology) are precariously close. While corrections, or what in this case has merely been a pullback, can be unsettling, they are a natural part of any market, even a bull market, environment.

 

April Monthly Option Expiration Week - DJIA Up 33 of Last 42

April’s monthly option expiration is generally bullish across the board with respectable gains on the last day of the week, the entire week, and the week after. Since 1982, DJIA and S&P 500 have both advanced 27 times in 42 years on expiration day with average gains of 0.22% and 0.17%, respectively. Monthly expiration day was staging a comeback after four or five declines from 2014 to 2018 but took a hit in 2022’s bear market. Expiration week has a bullish track record over the past 42 years. Average weekly gains are right around 1% for S&P 500, DJIA and NASDAQ. The bullish bias of April monthly expiration also persists during the week after although average gains have not been as strong with selling pressure rising recently (since 2014).

 

April 2 Seasonal MACD Signal Triggered Right on Time

We issued our Best Six Months MACD Seasonal Sell signal for DJIA and S&P 500 to newsletter subscribers on April 2 when slower moving MACD indicators applied to DJIA and S&P 500 both turned negative after the start of the last month of the BSMs. This marked the start of our transition to a more cautious stance.

Arrows in the charts point to a crossover or negative histogram on the slower moving MACD used by our Seasonal Switching Strategy to issue a sell signal. NASDAQ’s “Best Eight Months” lasts until June. Subscribe to our Almanac Investor Newsletter and get all our trades. https://stocktradersalmanac.com/Alerts.aspx

We do not merely “sell in May and go away.” Instead, we take some profits, trim or outright sell underperforming stock and ETF positions, tighten stop losses and limit adding new long exposure to positions from sectors that have a demonstrated a record of outperforming during the “Worst Months” period.

 

Election Year Drawdowns Happen – S&P 500 Average Pullback 13% since 1952

After five straight months of gains and numerous new all-time highs, recent weakness and the corresponding spike in volatility seem unfamiliar. Despite lingering inflation and escalating geopolitical tensions, S&P 500 was down 3.86% from its closing all-time high of 5254.35 on March 28 through its close on April 16. This is well below the average historical largest drawdown during an election year since 1952 of 13.07%. Were it not for steep declines in 2020 and 2008, election years have tended to enjoy relatively modest drawdowns. Of the last 18 election years, 11 experienced single-digit drawdowns. The smallest was just 3.55% in 1964. DJIA’s record is similar to S&P 500 while the higher beta stocks of the NASDAQ Comp have experienced larger election year drawdowns.

 

Stocks Can Go Down


“However beautiful the strategy, you should occasionally look at the results.”- Winston Churchill

After more than a 30% total return on the S&P 500 the past 12 calendar months, a five month win streak, and a 27% rally in the first 100 trading days off the late October lows, we could finally be looking at a well deserved break. We want to stress, this isn’t something to fear, as it is all part of the process.

In fact, now could be a good time to remind investors that volatility is the toll we pay to invest. Meaning, we all want the gains, but sometimes you have some pain along the way. Or to quote Ben Franklin, “There are no gains without some pains.” Remember last year? Stocks gained more than 20%, yet there was a 10% correction into late October and many investors were quite worried at what was a fairly normal stock market development.

Here’s a great table that we’ve shared before on volatility in most years. Thanks to help from our friends at Ned Davis Research, the average year has more than seven 3% dips a year, more than three 5% mild corrections a year, and a 10% correction a year on average. After yesterday we’ve officially had our first 3% dip. That’s it, one 3% dip and your average year tends to see more than seven. That should put in perspective just how calm things have been lately.



Here’s one more way to look at things. The average year for the S&P 500 since 1980 saw a peak-to-trough correction of 14.2%, with the smallest ever at only 2.5% in 1995. More than three months into 2024 and stocks have only pulled back 3.7%, which would make it one of the smallest ever.

Even last year, when stocks gained more than 25% there was a 10% correction into late October. Once again, we think we are in a bull market and stocks will be higher from where they are now until the end of the year, but to think it’ll be an easy ride getting there isn’t very likely.



Looking at the past 44 years, 23 times stocks fell at least 10% peak-to-trough at some point during the year and 13 of those times (so more than half the time) stocks managed to finish green. The average gain those 13 years? 17.5% on average, suggesting that a correction can indeed happen quite often, but that doesn’t mean stocks have to have a bad year.

Lastly, the S&P 500 closed beneath it’s 50-day moving average for the first time in more than five months yesterday (or 110 trading days to be precise). This was the longest such streak since 2011!

I looked at other long streaks that lasted at least 100 days and what happened after an eventual close beneath this important trendline. Sure enough, three months later stocks were higher more than 87% of the time and six months later higher more than 81% of the time. Could there be a little more weakness, yes, that wouldn’t be out of the ordinary, but big picture we expect any weakness to be well contained and this bull market is still alive and well.

 

Rates Are Higher, Just Like Everyone Expected


“If everyone is thinking alike, then somebody isn’t thinking.” -General Patton

The quote above is one that I’ve used more in my career than probably any other quote. Markets are all about what is priced in and what isn’t, suggesting that the big opportunities can be found by going against the crowd in some instances. I’m not saying be a contrarian for the sake of being a contrarian, but when things line up against the crowd and you have reasons to go against the herd, that is where huge opportunities can be found.

Last year is the perfect example of this. To start the year all we heard about was the near certain bear market and recession that was coming. It was the most anticipated recession we’ve ever had, even though it hadn’t happened yet. This of course meant the market had priced a recession in and the opportunity was in going against the crowd. The Carson Investment Research team shared data daily on why we didn’t see a recession ahead and expected stocks to do quite well. In fact, we’ve been overweight stocks since December 2022 and remain there today.

This year we’ve seen another example of the crowd all agreeing and the total opposite taking place.

I’m a big fan of the Bank of America Global Fund Manager Survey. It comes out monthly and shows how real money managers are positioned. At the start of the year, it was widely anticipated the Federal Reserve Bank (Fed) would cut short-term rates and as many as seven cuts were expected just a few months ago. As a result, 91% of those surveyed expected rates to go lower over the coming year, the highest and most consensus view ever for this survey. Granted, we still may have lower short-term rates at the end of the year, but with record expectations the potential for extreme positioning was there.



Sure enough, with everyone on one side of the boat, the opportunity was on the other side, as rate cut expectations have come down drastically the past two months, while yields as a result moved higher, not lower.



Here’s a nice chart that shows only two cuts (of 0.25% each) are now expected this year, from the peak of seven three months ago.



Even when most expected six or seven cuts, we always said it would be closer to three. Our main reason was we believed the economy would remain stronger than expected and there just wasn’t a need for that many cuts. That many cuts could mean an economic slowdown, while a few cuts could simply be recalibrating as inflation came under control, with no need for rates up over 5% anymore.

As a result, we came into this year with an underweight on bonds, with very little exposure to longer-term Treasuries. Many were in the camp that you should load up on bonds and buy longer duration bonds (think Treasuries), but we faded the consensus once again. As a result, bonds are having another rough year as rates jump.

Why are yields higher? There are two reasons: the economy is strong and recent inflation data has been a tad higher than expected. Look at recent consumer data like retail sales—the consumer isn’t slowing down. We also are seeing improvements in manufacturing sentiment, which could be a clue strength is coming there as well. Oh, and we are creating 200,000 to 300,000 jobs each month, not something you see in a slowing economy.

Regarding fears that inflation will continue to be sticky or is about to surge, we think there’s room for skepticism. We still see many reasons to expect overall inflation to continue to trend lower and the recent blip is just that, a blip after massive improvements over the past year. Sonu Varghese, our VP, Global Macro Strategist, wrote about this last week in Is It Time to Worry About Inflation Again?, so I won’t say much more on the subject.

As a result, we went from hearing about six to seven cuts, to potentially none being floated! Some economists in bowties are even saying we need rate hikes.

What did the Carson Investment Research team do as a result? For the first time in a very long time we added some bond exposure on the longer end of the curve in the tactically-oriented models we run for our Carson Partners. We are still overweight stocks relative to bonds, but the pendulum swayed too far the other direction the past few months, creating an opportunity to again go against the crowd, as we still expect inflation to improve and as a result, we’re likely see at least two rate cuts.

Let’s sum it up. If you have an average portfolio, you will have average results. There is nothing wrong with that, but our job is to take the big swings when it makes sense. Being overweight equities has made sense and worked very well; now we think fading the masses talking about no cuts (or even a hike) could be quite successful.

 

Big Election Year Q1s Dip April-May Before Gains Last 7 Months

2024’s great start was the third best Election Year Q1 since 1950. Looks like we’re tracking Top Q1 Election Years more pronounced April-May dip. Chop continues in July and August and these years have marked time until the election in November, gaining about 2.5% on from April to October. Regardless of the election outcome S&P 500 suffered only two losses in the last seven months of election years since 1950, 2000 and 2008 (2024 STA page 80).