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This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
I have always found it amusing to put stock market outlooks in the context of personal life experiences.
And I have a new one to share with you dedicated Morning Brief readers today.
While I was running outside on July 4 in 90-degree weather in barefoot footwear as part of an obsessive workout regimen, I had a few passing thoughts on the direction of stocks going into the November presidential election.
The outlook reminds me of those childhood times when I did something bad, and my dad sought to discipline me. I would always run to the closet and close the door, somehow reasoning he wouldn’t find me in there next to my Transformers and Ninja Turtles toys.
Time after time, I was wrong — he found me, and I learned in those moments that there was truly nowhere to hide.
That’s what investors are facing in the lead-up to the presidential election, pros tell me.
“My simplistic answer is the US is just so supersized and enormous that if the US doesn’t work [around the election], there are very, very few places to hide,” Bradesco head of equity strategy Ben Laidler said on Yahoo Finance’s Opening Bid podcast (video above or listen here).
Added Laidler, “I can come up with one or two. Maybe China is one. But, you know, there are very few places to hide.”
This really makes a lot of sense to me.
Are you going to cash out of 50% of your super profitable Nvidia (NVDA) position by the end of the summer and go all in on Europe with the view it will be less volatile? Come on.
The European Union’s first quarter GDP increased by a paltry 0.3% quarter on quarter. Fourth quarter GDP was revised down to a negative 0.1% from a previous 0%. The EU was in a technical recession in the second half of 2023!
No real growth acceleration in the EU is expected from here.
Inflation in the EU remains omnipresent, prompting ECB president Christine Lagarde to push back on expectations of another interest rate cut this year. The ECB delivered its quarter-point cut at its June 6 meeting.
The takeaway is that Europe lacks catalysts.
Let’s take a brief look at China.
China’s first quarter GDP rose 5.3%, but investment in property and developments tanked by 9.5%. One industrial CEO recently told me they do not expect their business in China to inflect until later in 2025.
A former high-ranking Cabinet member of the George W. Bush presidency detailed a recent Chinese trip to me a few weeks ago. They were surprised by the negative tones among Chinese consumers and fear there is surprising economic downside ahead due to pressured household budgets.
All of that aligns with lackluster sales in China recently from consumer giants Nike (NKE) and Levi’s (LEVI).
So China and Europe are off the table.
“We have already witnessed sharp market reactions around elections in India, Mexico, and France,” Truist co-chief investment officer Keith Lerner reminded clients in a note.
So much for those countries.
Maybe bitcoin shakes off its latest sell-off and catches a pre-election bid as a hedge on ballooning deficits hurting US dollar credibility.
But who knows.
“The election is one of the ingredients of this wall of worry that I think the market is just going to keep climbing, along with inflation and recession fears,” Laidler added.
Hardly comforting.
Just like I did as a kid, you are going to have to suck up any pain in markets brought on by the Biden vs. Trump chaos. The reality is there is nowhere to hide.
The long-term bull trend in markets remains intact, said Wall Street’s “Einstein,” Peter Tuchman. Listen in below to what he told me on Opening Bid.
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