Midterms On Our Mind

The big things you need to know:

• First, we took a look back at equity market and sector performance in 2H18 and 2H22, around the last two midterm elections. Conditions were choppy with two distinct drawdowns interrupted by a meaningful rally. Consumer Staples and Health Care outperformed during the drawdowns while Financials, Industrials, and Materials outperformed in the rebounds.
• Second, other things that jump out in our updates this week include shifts we’re seeing in our factor work, descriptions of a cautious consumer in our earnings call transcript analysis, the tendency of the stock market to perform well when IPO activity is ramping up, and what we see as reasonable valuations across the major indices in the US.