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@NDR_Research

@NDR_Research

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Ed Clissold

@edclissold

Jul 26

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

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Ed Clissold

@edclissold

Dec 14, 2024

The @NDR_Research SPX Cycle Composite is pretty bullish on 2025, esp. 1H. Why?
First, what is the Cycle Composite? An average of 3 historical price patterns: 1yr, 4yr (post election yrs), and 10yr (yrs ending in 5). Think of it has history's view of what 2025 can look like? 1/4

The 1 yr and 4 yr are intuitive. Fund flows & IPOs follow seasonal patterns, as does gov’t policy around pres. elections.
Why the 10 yr? The Kondratieff cycle shows the economy goes thru 10yr boom and bust waves. Years ending in 5 are by far the best for the SPX, on avg. 2/4

Only 2 recessions in year 5s. 1945 (demilitarization) & 1975 (ended in March 1975).
SPX has declined only once in a year 5 since 1895. That was in 2015, also the only year 5 that includes an @NDR_Research defined cyclical bear market. 3/4

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Ed Clissold

@edclissold

Dec 7, 2024

Funny what of my research gets picked up and what doesn't. On Monday we featured this table showing that the year after the S&P 500 has logged at least 50 record highs, stocks have been weak.
I get it. Simple sells. Being bearish sells (up to a point). @NDR_Research 1/3

But factoids are not research. Nuance matters. The logic behind the study is by the time the market logs so many records, it has not only recovered from a bear but the bull is mature. Trees don't grow to the sky.
But bears don't die of old age, either. They need a catalyst. 2/3

Of the 7 cases, only 2 were weak right away. 3 were strong 1H, weak 2H (1929 crash, 2015 oil & Chinese growth, 2018 Fed tightening), 2 were solid all year.

My takeaway is we enter 2025 in good shape but potential negative catalysts are out there (inflation, EPS slowdown). 3/3

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Ed Clissold

@edclissold

Mar 1, 2024

A 🧵on the election and markets:
Biden/Trump is a rematch no one wants, but Biden in particular has an approval rating issue. At 41%, he has the lowest of any president seeking reelection at this point in the year. The median for incumbents who won is 55%. @NDR_Research 1/5

Taking Biden's reelection bid out of the equation, presidential approval acts like any sentiment indicator. A low % implies pessimism, which tends to be bullish for stocks.
For approval rating there's a "no bad it's bad" zone but Biden's approval would need to fall 6 points. 2/5

The start of election years tends to be weak. Stocks have done better when the incumbent party has gone on to retain the White House. It's a chicken-and-egg argument. A strong economy helps stocks and therefore helps the incumbent. 3/5

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Ed Clissold

@edclissold

Jan 26, 2024

The Fed is preparing the markets for a rate cut. Cuts have been bullish on avg. The DJIA has been flat before the 1st cut & up 15% a year later.
Context matters, esp. vs the economic cycle. (Btw, we use the DJIA for more history but trends are similar w/SPX). @NDR_Research 1/5

When the Fed has avoided recession, stocks have ripped higher, +24% 1 yr later.
When the economy has been in recession within a year of the 1st cut, the DJIA has weak beforehand but +10% 1 yr later. Most of the gains came in months 8-12. Why? Again, context matters. 2/5

Historically the Fed waited until near the end of the recession, after much of the damage was done.
When the Fed cut early in recession, stocks were mixed for months before rallying.
When the Fed cut before recession, the DJIA fell for 10 more months, on avg. 3/5

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Ed Clissold

@edclissold

Jan 19, 2024

We're entering the ❤️ of earnings season, so here's a 🧵on where we are in the cycle.
1. The bull market has left the early sentiment-driven phase when "P" rises > "E" and entered the earnings-driven phase (e.g., EPS growth needed for bull to continue). @NDR_Research 1/6

@NDR_Research 2. SPX trades not off EPS growth but the change in the growth rate. Consensus is calling for EPS growth to accelerate in CY24, which would be bullish.
Investors have learned that analysts are often too optimistic, so it's TBD if their positive outlook comes to fruition. 2/6

3. A risk to consensus estimates are that they are back-end loaded. Single quarter y/y SPX operating EPS growth is expected to spike from <10% in Q1 & Q2 to 20% in Q3 & 18% in Q4. Comps play a role but that's baking in a soft/no landing scenario. 3/6

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