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Two weekends ago we had an assassination attempt on a former president. This past weekend the current president walks away from his incumbent race. And the U.S. is supposed to be the standard bearer for the world. Yeesh! I did learn something new about politics this weekend. All those who were reporting that President Biden would step down on Sunday afternoon actually knew what they were talking about and those folks have credibility. All those folks who vehemently and defiantly denied he would ever walk away know basically nothing.

With a whole new ballgame in presidential politics, we need to figure out if any of this really matters for the markets. I see pundits crediting a potential Trump presidency with the massive asset allocation shift 11 days ago away from mega cap technology and into the small and mid caps. I don’t buy it, mostly because there were no new pieces of data to support that and anyone who thoughtfully managed portfolios would have done it a lot more quietly without moving markets.

With VP Harris the presumed nominee, she basically inherits President Biden’s agenda and policies. It will be very difficult for her to pivot and distance herself after almost four years. We do know that she supports higher taxes than Biden, but I don’t think that additional amount is a market mover. She also wanted to ban fracking which could be a sector mover.

Overall, I do not believe the candidate change is significant from a market perspective. Stocks were oversold at the end of last week. They are due for a bounce. I expect mega cap tech to bounce the most simply because it fell the most although Harris would be kinder to that group than Trump. The rotation into small and mid caps could be argued part of a Trump trade because of his tariff proposals. Overall, I think there are legs to the small cap trade regardless of how Harris or Trump are polling. As I have said all year, the election has almost no bearing on the markets and economy in 2024. Don’t get fooled by the lazy who tell you otherwise.

I will close with this unpopular statement. The next president is going to get saddled with a recession.

On Friday we bought EWT. We sold EPI, RYEIX, and some levered NDX.

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