History doesn't repeat, but it does rhyme. Despite the volatility the S&P 500 has been following the typical post-election year trend. The trend peaks in early August, and the year-end rally is weaker than normal.
Why and is it relevant in 2025? A 🧵 @NDR_Research 1/7
The reason 2H of post-election years tends to be weak is that the combo of monetary & fiscal policy tends to peak early in post-election years. Policy remains restrictive until shortly before mid-terms, on average. 2/7
Government policy has been especially restrictive in the 1st year of 2nd terms. Policy growth was negative in 4 of the last 5 "year 5s" Presidents are more concerned about legacy than the economy in the ST. They know lame duck status is quickly approaching. 2/7
Policy has not been restrictive YTD so far. Our Monetary, Fiscal & Exchange Rate Policy Index is up y/y and is accelerating, which has been bullish for stocks. 4/7
Breaking down the Policy Index into its components, the biggest driver is that federal spending is growing faster than receipt growth. The weaker dollar helps.
It also explains why Trump has been so critical of Powell. He needs to Fed to offset what might be coming...5/7
There's no such thing as a free lunch. Higher tariff revenue is restrictive policy. The question is whether the OBBBA offsets tariffs.
Trump is clearly not following the 2nd term pattern (TACO trade corollary) by trying to stimulate and raise tariffs simultaneously. 6/7
History doesn't repeat, but it does rhyme. Our defensive SHUT Index relative strength has been tracking the election cycle closely. SHUT sectors tend to outperform in Aug-Sept as the market pulls back. Even though the $SPX is making new highs leadership has started to rotate. 7/7
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