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The S&P 500's post-election gain is similar to 2016, but breadth and small-cap strength have been less impressive. Financials has tracked its 2016 cycle even as the yield curve steepening has stalled. Gold, the dollar, and Bitcoin have tracked their 2016 patterns, with Bitcoin's rally much stronger in 2024.

A recent rise in consumer sentiment and consumer cyclical stocks has us optimistic that Millennial theme outperformance can continue. We acknowledge that Tesla and Amazon have been key drivers of consumer returns since September 6, but other areas like Consumer Services are also showing promise. We are considering making MILN our favored Millennial Spending ETF, which has meaningfully less exposure to Consumer Staples than our current favored ETF, IEDI.

ABI trend bodes well for nonresidential construction spending in the U.S. in 1H 2025. Elevated mortgage rates keep application volume subdued. U.K. inflation picks up more than expected, putting BoE on a more caution rate cutting path. Canadian inflation accelerates, likely slowing the pace of future BoC rate cuts.

The U.S. Dollar Index has reached the upper end of its range with excessive optimism. The euro and yen have reached the lower end of their ranges with excessive pessimism. The pound and gold have relieved excessive optimism, with gold maintaining its long-term uptrend. We remain bullish on gold, and neutral on the dollar and currencies.

High mortgage rates and hurricane impact weigh on housing starts in October.

European Q3 earnings have been robust and been received positively by investors. Banks have had the highest beat rate again. Further, euro economic surprises are now net positive, suggesting that economic forecasts have become too pessimistic, broadly bullish for equities. But longer-term, survey data suggests that geopolitical uncertainty could weigh on European equities.

Credit spreads continue to tighten with HY the lowest since pre-GFC and IG the smallest since pre-LTCM. Recommend loans over fixed-rate debt over the intermediate term. Greater optimism among banks with respect to the lending outlook.

Rising HMI implies a pickup in housing starts in the near-term.

The presidential election cycle shows the best two years are the last two. Valuations argue for limited upside. Other technical indicators suggest some risks ahead.

Stronger-than-expected U.S. retail sales suggest the economy has started Q4 on solid footing. Industrial production still weak amid Boeing strike and hurricane impacts. But surging Empire Index points to a likely rebound in the near-term. Business inventories kept in line with sales. Lean retail inventories pose an upside risk to inflation. A pickup in import prices rounds the picture of stalling broad disinflation. China's economy improves due to stimulus. Japan's GDP increases the case for another BoJ hike. U.K. economy slows more than anticipated.

Weekly talking points and key visuals from NDR strategists' insights.

Last week, following Trump's victory in the Presidential election, inflation expectations experienced their largest single day jump in more than a year. In our universe of 650 unlevered, long-only ETFs with more than $1 billion AUM, energy and natural resource related funds, like the VanEck Oil Services ETF (OIH), show the highest sensitivity to inflation expectations. Tariffs, deregulation, and looming OPEC+ supply make disentangling macro drivers difficult. However, if stalling disinflation causes inflation expectations to climb, energy and natural resource themes should go with them.

The expected pro-growth policies of the new Trump administration have boosted expectations for inflation and nominal GDP. Historically, 10-year Treasury yields have tracked nominal GDP. As a result, the market's expectation of the Fed's terminal rate is higher than the Fed's September projection. Faster nominal GDP will boost profit growth, reducing default risk, and support small-cap stocks.

We continue to maintain a neutral stance on China. Technical indicators remain relatively positive, albeit less so than before. However, the macroeconomic picture and the fundamentals haven't fully confirmed. We would need to see significant and sustained improvement in fundamentals and macro conditions to be more optimistic about Chinese equities.

Producer prices in the U.S. rise in line with expectations. Sticky services PPI may be a hurdle for future Fed rate cuts. Jobless claims decline to a six-month low, a sign the labor market remains healthy. Eurozone economy in solid state in Q3, but risks persist.

Bond proxy industries and sectors have mostly not participated in the post-election stock market rally. If stocks continue to shrug off rising interest rates, bond proxies will likely continue to struggle. If stocks eventually falter under the weight of higher borrowing costs, history suggests that bond proxies could offer refuge.

Yields have surged following massive political upheaval. Inflationary pressures could limit the response by central banks. No changes to regional allocations, as spreads approach resistance levels. Remain overweight EM debt relative to DM debt.

The NDR Daily Trading Sentiment Composite has returned to its excessive optimism zone. In years with similar patterns, the S&P 500 usually made higher highs before year end despite optimism. More than optimism may be needed to derail a year-end rally; watch interest rates and earnings expectations.

CPI inflation in the U.S. levels off in line with expectations, keeping the Fed on an easing path for now. Rising mortgage rates weigh on mortgage applications. Japan corporate good prices accelerate, supporting BoJ hike path.

Aerospace and defense related stocks, which make up the majority of members in our Space theme, broke out to new highs following the election last week. Even under conservative GDP growth estimates, a return to the average defense spending under Trump previously could grow defense spending by more than 10% compared to Biden. The group's relative strength improvement and reversing sentiment are bullish. Swift resolution of the short-term overbought condition and longer-term breadth divergence may lead to an upgrade of the theme.

The recent 'Trump bump' rally was not broad-based enough to trigger a breadth thrust. The rally has seen more of a rotation and we look at ETF flows and volume to determine where. Investors have shown a strong preference for domestic, cyclical Value, small-caps, Banks, Construction, and Tech.

NFIB index climbs to highest level since 2022, supporting a positive U.S. growth outlook for next year. German investor confidence unexpectedly falls, as headwinds rise.

Shifting our tactical recommendation from underweight to neutral for European Value versus Growth. An improvement in the global economic outlook supports the case for Value, as do our overall Europe Value/Growth indicators. However, relative valuations, trends in forward earnings and the 2016 experience mean we do not recommend an overweight.

Reducing duration multiple by 5% to 100% of benchmark duration. Closing out 2-year and curve steepener trades. The market looks a lot like 2023 with big divergences between trend and fundamentals. The political makeup looks a lot like 2016.

The S&P 500 posted its best post-election gain on record, as did the Russell 2000 and several cyclical sectors. Defensive sectors declined, preventing breadth thrust signals from firing. The risk is that the rotation turns into divergences, especially if bond yields continue to rise.

A rise in expectations boosts consumer sentiment in the U.S., which bodes well for consumer spending in the near-term. Canadian job market disappoints, putting oversized rate cut on the table again. Japan's household spending slows amid inflation concerns. Brazil's inflation rises above central bank target, indicating more hikes ahead.

Weekly talking points and key visuals from NDR strategists' insights.

Banks have outperformed Utilities six months after the start of recent rate tantrums. If rates keep rising we will focus on positive rate-sensitive themes, often found in commodities and Financials industries, for upgrade opportunities.

President-elect Trump's proposals will likely swell the budget deficit and government debt. With the economy running above potential, further fiscal expansion could be inflationary. This should keep upward pressure on bond yields, creating a headwind for stock market performance.

Fed cuts rates for the second time on its way to neutral. Look for the pace to slow to a quarterly cadence starting sometime in Q1 for a total of 75 bp in 2025. The back end of the curve and the term premium flattened in 2017.

NVDA and SHW are replacing two smaller stocks, INTC and DOW, in the DJIA on November 8. Stocks that have left the DJIA have outperformed those added starting about two months after the change. The DJIA has outperformed its long-term average the year before changes and has been a market performer the year after.

The global economy saw economic momentum pick up in October, according to the latest PMIs, indicating a firming of growth as we approach yearend. Leading indicators point to even more improvement in the months ahead, supporting equities. There are plenty of reasons to be optimistic about the global macroeconomic outlook, but the threat of broad-based tariffs and higher inflation present risks.

Continued strong productivity growth keeps a lid on unit labor costs and inflation. Jobless claims remain subdued, a sign of robust labor demand in an expanding economy. Mortgage applications decline amid rising mortgage rates. Chinese exports surge ahead of tariffs and strong demand. German industrial production slumps.

Upgrading cash from underweight to marketweight, moving 5% from bonds. In response to model, now marketweight cash, underweight bonds, and maximum overweight equities. November-December strongest two-month period, especially in election years. Response to bond yields will influence longer-term equity performance.

The Catastrophic Stop model entered November fully invested. The International Equity Core model is overweight China, the U.K., Canada, and Australia, while underweighting Japan, Germany, France, and Switzerland. The Explore model favored India, Mexico, Malaysia, Philippines, and Thailand.

The All-Country World ex.-U.S. Total Return Index declined over 480 basis points in October. The International Equity Core model is overweight China, the U.K., Canada, and Australia, while underweighting Japan, Germany, France, and Switzerland. The Explore model favored India, Mexico, Malaysia, Philippines, and Thailand.

During October, global stocks outperformed U.S. bonds by more than 25 basis points. The Global Allocation model's equity weighting remains above benchmark allocation. The model has an above benchmark weighting for Canada and the U.S., while holding below benchmark allocations for Japan, Pacific ex. Japan, Emerging Markets, Europe ex. U.K., and the U.K.

During October, global stocks outperformed global bonds by more than 110 basis points. The model's equity allocation remains above benchmark weighting, with U.S. Large-Caps, U.S. Growth, and Emerging Markets each receiving more than 15% allocation. The largest fixed income allocations were Emerging Market bonds and U.S. High Yield, both with more than 5% weights.

The Fixed Income Risk Management model deteriorated last month but entered November with a fully invested allocation to fixed income sectors. Emerging Market bonds, U.S. Floating Rate Notes, U.S. High Yield, and International Investment Grade are above benchmark weight. U.S. Investment Grade Corporate, U.S. Long-Term Treasurys, and U.S. Mortgage-Backed Securities, and U.S. Treasury Inflation-Protected Securities are below benchmark weight.

NDR Economic Cycle Infographic updated for Q3 2024, highlighting 12 economic sub-cycles. Real GDP grew at a solid pace in Q3, led by strong consumer and government spending. Labor market conditions have normalized. Most sub-cycles reflect continued expansion, despite still-high interest rates.

The Bloomberg Barclays U.S. Aggregate Bond Total Return Index was down 2.48% in October. Emerging Market bonds, U.S. Floating Rate Notes, U.S. High Yield, and International Investment Grade are above benchmark weight. U.S. Investment Grade Corporate, U.S. Long-Term Treasurys, and U.S. Mortgage-Backed Securities, and U.S. Treasury Inflation-Protected Securities are below benchmark weight.

The Catastrophic Stop model deteriorated last month but entered November with a fully invested equity allocation. Consumer Discretionary, Financials, Information Technology, and Real Estate are above benchmark weight. Energy, Materials, Industrials, Communication Services, Consumer Staples, Health Care, and Utilities are below benchmark weight.

After a 5-month winning streak, the S&P 500 Total Return Index dropped almost 1% in October. Financials, Information Technology, Health Care, Consumer Discretionary, and Utilities are above benchmark weight. Real Estate, Communication Services, Materials, Energy, and Consumer Staples are below benchmark weight.

The NDR Sentiment Composite and history of Democrat-to-Republican transitions support a year-end rally. The biggest risks are interest rates and inflation expectations in the near term and a fiscal cliff in the intermediate term. Small-caps and Value are benefiting from economic optimism; watching models for confirmation.

We upgrade Bitcoin (BTC) as a long-only trade with a price target of $121k (+60%). We like the risk/reward for Bitcoin. The crypto is breaking out on optimism of a Trump victory and we see the price running with little resistance at least until Trump takes office. If Bitcoin simply breaks below its new support (former resistance) level near $73K, its March 2024 high, we will downgrade -- meaning only about 5% downside from current levels.

Upgrading Financials (OW), Discretionary (OW), and Communication Services (MW), and downgrading Health Care (UW) and Utilities (MW). The changes are all in agreement with the current recommendations from the sector model. The positions should benefit if the typical post-election cyclical transition plays out this cycle.

Thematic breadth was resilient in October, with 22 of 48 (46%) themes outperforming the S&P 500. Key drivers were earnings beats from the Tech Titans, better-than-expected economic data and speculation on a Trump victory. Top-performing themes included Blockchain, Bitcoin, FinTech, Travel, Uranium and Cloud. Look for more upgrades from us if the risk-on environment continues after the election.

The S&P 500 registered its first monthly decline since April amid rising rates and uncertainty heading into the election. Despite the loss, sector leadership was risk-on, with Financials, Communication Services, and Energy the only sectors with positive returns in October. Trump Trades have been most bullish for cyclical Value sectors.

The backup in bond yields has moved several relative valuation indicators from bullish to neutral for stocks. Rate cuts should make stocks more competitive versus cash. Accelerating EPS growth has offset valuations in 2024, but that may not be the case in 2025.

Both the ISM and S&P Global U.S. Services PMIs show service sector growth near highest since 2022. Trade deficit swells, as imports jump. China's economy shows more signs of stimulus-induced recovery.

A Trump victory would likely see continued underperformance of European vs. U.S. equities, while the risk of tariffs would prove problematic for European exporters to the U.S. However, on an absolute basis, European equities and Cyclical sectors have tended to perform strongly following U.S. elections. We highlight key indicators which support a Cyclical bias within a European equity portfolio.

We apply the time-tested concepts from Norman Fosback's seminal book Stock Market Logic to sectors. The concepts span macro, fundamental, sentiment and technical, utilizing NDR's 360 approach. We determine whether the weight of the evidence is currently more favorable for cyclical or defensive sector leadership.

Although the ETI was little changed in October, its cumulative decline points to softer economic growth in the near-term. Factory orders decline in line with expectations, reflecting continued weakness in the manufacturing sector.

Government policies will likely be more important than monetary policy in 2025. The labor market is cooling and is not a source of inflationary pressures. Our base case is for rate cuts this week and next month, followed by three 25 bp cuts in 2025.

Stocks have historically rallied into the end of the year after an election. Our trend indicators and models remain bullish for stocks. Short-term sentiment is more neutral, while social mood remains subdued.

Emerging markets are participating in the global uptrend, but relative strength has weakened. Trend indicators for EM are mixed, while fundamentals suggest stretched valuations. Our model remains neutral on emerging markets, consistent with our marketweight recommendation.

Weakest nonfarm payroll gain since 2020, due to weather and labor strike distortions. Although the hurricane impact will fade, broad labor market conditions have cooled and will keep the Fed on an easing path with a 25 bp rate cut next week. The ISM Manufacturing PMI declines, as the sector remains in the doldrums.

Weekly talking points and key visuals from NDR strategists' insights.

We introduce our new Commodity Model, replacing the prior model after nearly 15 years. Though the indicators are new, the philosophy and functionality should be familiar to NDR clients. Output has been modernized with daily updates and interactive charts.

The October Conference Board survey showed 51.4% of consumers expect the stock market to rise over the next 12 months, the highest level ever reported in the 37 year history of the survey.

The U.S. economic recovery since the pandemic has been astounding, especially when one compares it to the rest of the G7. The handling of the pandemic and relatively stronger potential growth explain the discrepancy. Relative strength in the U.S. economy has also coincided with its relative equity market outperformance in the long run.

PCE inflation continues to ease, keeping the Fed on track for a 25 bp rate cut in November. Layoff trends show labor demand remains robust. Employment costs continue to cool down. Most regional manufacturing indexes remain in contraction territory. Eurozone inflation accelerates more than expected, keeping ECB on cautious cut path. China's official PMIs show modest expansion amid signs stimulus is working. Japanese industrial production rebounds, but outlook mixed.

Volatility increasing across markets, commodities and currencies. With currencies in ranges, sentiment supporting prospects for dollar to weaken and for yen and euro to strengthen. Rising volatility has yet to call for downgrading equities from overweight, while supporting positions that remain bullish on gold and neutral on the dollar and currencies.

The Airlines industry has been the lone bright spot within Industrials in recent months, rising more than 40% since mid-August. The industry is too small to significantly impact the sector level; however, several of our Airlines-specific indicators have turned more positive. Our Airlines Scorecard is now bullish, with capex and seasonal trends suggesting more room to run.

Trump's proposal to implement tariffs on all U.S. imports would have much larger negative implications on global growth and inflation than tariffs in his first term. The economies that rely most on their exports to the U.S. are Mexico, Vietnam, Canada, and Taiwan. The U.S. imports a broad array of products from these economies, but a major standout is autos and parts, followed by machinery and consumer goods.

The rise in real yields has effectively matched the increase in term premium. Inflation expectations track changes in oil prices, which influence bond prices. A 2% real yield is attractive for conservative investors who want to preserve their purchasing power and earn a modest real return.

Consumer and government spending drive solid real GDP growth in Q3. Inflation pressures continue to ease. ADP private payrolls surge, a sign of firming labor demand in Q4. Stronger eurozone growth and inflation reduce chance of outsized ECB rate cut.

Our overweighted uranium ETF URA has had a volatile ride. Macro and China concerns saw the ETF correct 28% after our upgrade only to rebound 37% since September 6. Near-term, we remain positive as China stimulus could help improve energy (and nuclear) demand and the country is building more new reactors than anyone in the world. Longer-term, we are encouraged that nuclear is seen globally as a critical part of reaching zero-emission goals, especially by Big Tech. Small modular reactors (SMRs) aim to be part of the solution.

The stock market has often declined when the outcome of the election has been delayed. The macro backdrop has mattered more for both immediate and long-term returns. Watch sentiment heading into Election Day for how well the market can digest uncertainty.

Earnings beat rate momentum peaked and is now negative. The breadth of positive earnings revisions has weakened. U.S. revisions have declined, with negative implications for future earnings.

Rising consumer confidence points to strong economic growth in Q4. JOLTS data shows healthy labor market rebalancing. Existing home price growth moderates. Goods trade deficit swells, weighing on Q3 GDP estimate. Japan's labor market tightens, but political uncertainty may delay BoJ rate hike.

Household net worth and liquidity are higher than pre-pandemic across the wealth distribution. The housing wealth effect is more widespread than the stock market wealth effect. Rising wealth and liquidity help keep delinquency rates subdued, which is a tailwind to credit growth and the economy.

A red sweep will likely result in higher bond yields and credit outperformance. The best environment for the bond market is a split Congress. Political uncertainty may linger for days. Volatility and term premium have increased. The surprising Japanese election could prompt an increase in our Asia Pacific regional allocation.

The top-level equity allocation dropped to 72%. The PMI breadth and Baltic Dry Index trend indicators whipsawed back to bearish on equities. U.S. Large Caps, U.S. Growth, and Emerging Markets each have over 15% weightings. Cash received an allocation (almost 5%) for the first time since the end of April.

The NDR Absolute Breadth Index gave a fresh bullish reading, confirming other advance/decline indicators. The percentage of stocks at 52-weeks highs recently made a high for the current bull, but watch new lows. Volume demand and the percentage of stocks above their moving averages are also positive.

Durable goods orders decline, dragged by Boeing. Consumer sentiment improves ahead of the election. Economic activity strengthens across more states, keeping U.S. recession risk low. German business confidence points to signs of recovery. Tokyo CPI slows, but BoJ still on path to slowly tighten policy. Canadian retail sales rise, led by autos.

Weekly talking points and key visuals from NDR strategists' insights.

Paul Tudor Jones is credited with saying the most bullish thing an index can do is make a new high. So it is with great anticipation that we await a new all-time high from the NDR Tech Titans group.

Changes in the fed funds rate are only loosely related to changes in the inflation rate. The labor market is the more effective channel for changes in the policy rate. Monetary policy is a blunt instrument that impacts the labor market more than inflation.

Continue to watch for rising evidence of a secular top as well as a cyclical peak. Trump win and trade war could lead to a secular bear market. Cyclical top warnings would include dropping composite model, breadth divergences, shifting leadership, sentiment reversal, beat rate decline, and Bear Watch warning. Secular bull intact for now, as is cyclical bull.

U.S. Flash PMIs indicate robust services growth, but continued contraction in manufacturing. New home sales increase. CFNAI suggests economic growth tapered off at the end of Q3. CEO confidence fades, a downside risk to capex growth in 2025. Initial jobless claims slide, but continuing claims rise, as labor market tightness eases.

A corporate tax hike could disproportionately hurt the capital-intensive sectors that saw the most benefit in 2018. Trump's proposal to reduce the corporate tax rate to 15% for companies that produce products in the U.S could reduce the tax bills for Utilities, Communication Services, and Real Estate the most. Another trade war would challenge growth and cyclical leadership.

Harris' corporate tax rate hike proposal could decrease S&P 500 after-tax EPS by 9%, while Trump's tax cut could increase EPS by 5%. S&P 500 returns have been below average after capital gains tax hikes, but the 1% buyback tax had little impact on big net repurchasers. With little detail and Congressional approval needed, any final tax changes will likely be far different from current ideas.

Hard landers have underestimated the wealth effect. The increase in net worth, helped by homeownership, is supporting consumption. Consumption is more vulnerable to changes in market valuations, which could lead to policies that protect asset prices. A large intergenerational wealth transfer could further support equities at the expense of bonds.

Past real estate stimulus has just resulted in some stabilization in the sector, albeit at anemic levels. September's stimulus provides more hope, but just expect gradual progress. Given the real estate sector's connectivity to broader parts of the economy, this argues against an out-sized boost to overall growth.

Conviction in betting markets for a Trump victory is also reflected in our Trump Trade Index which has surged 23% since September 6. We highlight the 'Trump trade' influence as a driver for certain themes/industries but we are not likely to chase those returns because we still see the election as too close to call.

Broad-based decline brings existing home sales to lowest level since 2010. Architecture billings point to ongoing weakness in the CRE space. Richmond factory activity continues to contract, albeit at a slower pace. Services revenues barely up.

Both Crowd Sentiment and the Daily Trading Sentiment Composite are now in the excessive optimism mode. The Daily Bond Sentiment Composite is reversing from excessive optimism and high-yield spreads remain tight. Similar conditions exist across regions and asset classes with many market and investor-based measures of sentiment in neutral or optimistic modes.

LEI continues to decline. But other leading indexes and our Economic Timing Model point to continued economic expansion in the near-term.

Spreads remain tight particularly between high yield and Baa. IG OAS continues to converge to IG CDS. Major credit indexes continue to outperform the U.S. Aggregate. CCCs are also outperforming. Favorable credit fundamentals and plenty of liquidity suggest no recession on the horizon.

Global breadth currently confirming bull market. Divergences tend to lead market peaks. With the global bull now longer than the median, worsening global breadth would be a bear market warning.

Weekly talking points and key visuals from NDR strategists' insights.

China GDP slows, but quarter ends slightly stronger, although not enough to dispel China's move toward more stimulus. Japan inflation cools, but BoJ still on track to raise rates. U.K. retail sales unexpectedly rise. U.S. housing starts and permits edge down, led by multifamily units.

As spot WTI hovers around $70/bbl, the U.S. SPR has become an opportunistic buyer. Since falling to the lowest levels since the early '80s in July 2023, the SPR has purchased over 36 million barrels of oil. Spot WTI has averaged about $79/bbl over that same July'23-October'24 period, and to replenish the reserve to levels seen at year-end 2021, the SPR would need to purchase over 210 million barrels. With the Department of Energy's aim to purchase at $79/bbl or less, combined with other sentiment, macro, and fundamental evidence, we believe this supports a floor for oil and NDR's bullish oil position.

Despite mixed inflation reports for September, inflation trends remain benign. The current inflation backdrop is positive for equities. But there are some upside risks to inflation in the near term that could drive up bond yields and weigh on stocks - a risk to watch for in Q4.

Retail sales surprise to the upside, boosting Q3 real GDP estimate. Industrial production declines, due to Boeing strike and back-to-back hurricanes. Philly Fed manufacturing activity picks up. Optimism rises. Initial jobless claims partially reverse a Helene-driven spike. Builder confidence improves slightly, but election uncertainty holds it down. Eurozone inflation cools, resulting in back-to-back ECB cuts. Japan exports slump, reflecting global weakness.

After a strong first half, the global economy began to see some risk of a sustained global slowdown, a potential headwind to equities. But we have begun to see some signs of life in Q4 according to leading indicators, which reduces the risk of that adverse scenario. Broad-based global monetary easing and China stimulus positively impact the outlook.

Low recession risk, Fed easing, and political clarity post-election should favor cyclical leadership in Q4. A change in the trajectory of inflation and long-term rates, or renewed recession concerns, could derail a Q4 rally and cyclical sector leadership, but that is not our base case. Rapid earnings growth deceleration from Mag 7 components could tilt the scale in favor of Value sectors over Growth sectors within cyclicals.

Gold back at record highs and maintaining strong uptrend despite upturns in U.S. dollar and bond yields. Trend supported by negative momentum of expected real yield and TIPS yield, with yield curve at levels consistent with gold outperformance. Versus long-term trendline, gold less extended than it was at peaks in 1980 and 2011.

Any inverse correlation between real yields and U.S. Tech stocks disappeared in the latest equity bull market. Chinese Tech stocks have been more closely correlated with changes in U.S. real yields. The TIPS/Treasury ratio is, once again, at the top of its range.

Higher expected EPS growth in Q3 and Q4 may put downward pressure on the historically high beat rate. 2024's EPS acceleration may turn into modest deceleration in 2025, led by the Mag 7. A higher percentage of EPS growth may come from buybacks than sales growth.

U.S. import prices decline, led by cheaper fuel. Mortgage applications drop amid higher mortgage rates and hurricane impact. U.K. CPI slows more than expected, putting BoE on course to cut in November.

Following NDR Commodity Strategist Matt Bauer's upgrade of oil to bullish, we initiate a Long Oil trade via the US Oil Fund (USO). If we get a favorable surprise on demand via positive economic surprises or on supply via lower Middle Eastern oil, we believe USO will at least revert to its 2023 high of $83 (+15%). If USO breaks below its September 10 low near $67 (-7%), we will implement a stop-loss. We like the oil risk/reward profile and initiate our trade targeting a 15% absolute return for USO, with a six-month investment horizon.

The NDR Daily Trading Sentiment Composite returned to its optimistic zone just as the market exited a seasonally weak part of election years. When sentiment has been optimistic in mid-October, returns have been weaker into the election. If political uncertainty relieves optimism, it could set the stage for a year-end rally.

ZEW economic expectations and ECB bank lending surveys imply a likely improvement in the macro environment in the eurozone. Canada inflation undershoots, suggesting an outsized BoC cut. U.K. wage growth slows, while job market improves. In the U.S., Empire region manufacturing conditions worsen.

After a period of heightened uncertainty, we are seeing evidence of a return in risk appetite in Europe. And while implied volatility is elevated, falling spreads and recent outperformance of cyclical industries is consistent with a bullish outlook for European equities. We reiterate our overweight small-cap position, given improving risk indicators, seasonality, and fundamental factors.

The 10-year Treasury yield is an unreliable guide to the terminal rate. Estimating r-star is not any better for projecting the 10-year. A better approach is to treat the policy rate and the 10-year separately.

China's CPI and exports disappoint. Upcoming stimulus should help, but more clarity is needed. India's CPI spikes, putting near-term RBI rate cut at risk. Brazil's economic activity picks up in August.

Moving Average Model and broad cyclical sector leadership suggest the trend evidence remains bullish. But several major indices have not yet confirmed the S&P 500's record high. And the S&P 500 has gotten overextended versus its long-term trend.

PPI inflation comes in softer than expected, led by falling energy prices. Consumer sentiment down slightly. Inflation expectations remain contained.

Weekly talking points and key visuals from NDR strategists' insights.

Tech Titans are up over 9% since September 6, and we have noticed increasing volume demand for the sector. Also, the group's relative P/E has returned to its December 2022 level. The percentage of Tech companies with greater than 15% Y/Y sales growth (15.9%) looks like it might be rolling over, but that percentage is still higher than the S&P 500 (7.6%). A watchout would be if the relative gap narrows. While currently overweight Big Tech via the AIQ ETF, we could downgrade if Tech relative earnings growth slows meaningfully. We will be watching Q3 Tech earnings closely for downward earnings revisions to turn bearish.

Our flexible labor market put the economy in a relatively difficult situation during the pandemic, facing immense shortages and fueling inflation. Four years later, this has paid off as we now see greater representation of under-represented groups in the labor force and higher productivity. In the long term, a robust labor force and strong productivity growth contribute positively to potential real GDP growth and equity market performance.

This suggests a smaller 25 bp Fed rate cut at its next meeting. Jobless claims jump amid hurricane disasters.

Emerging markets have led the charge in private debt, much of it due to China, while developed economies have seen relatively larger increases in public debt. While high debt doesn't necessarily mean an impending financial crisis, elevated debt levels are typically associated with slower economic growth. Debt service ratios are better indicators of crises but will likely fall amid central bank easing.

Upgrading Energy to overweight. Persistent underperformance has left Energy extremely oversold. Fed and election cycles support the upgrade. Change is in line with NDR's bullish view on crude.

We remain bullish on U.S. stocks on an absolute basis and relative to bonds and cash, and are raising our year-end S&P 500 target to 5950 from 5725. A quick spike in interest rates could be the biggest risk to the market in Q4. The balance between economic growth and the pace of the easing cycle should determine Growth/Value and small/large relative strength.

As noted in our monthly focus, a return to risk on has led to broad thematic improvement. China stimulus and better-than-expected economic conditions in the U.S. have contributed to global shock themes outperforming. Batteries and Lithium and shorter duration themes like Natural Resources benefit from a global reflation trend.

Valuations climb higher presenting a long-term risk to stock prices. Households are highly invested in stocks, showing optimism. Consumer and CEO sentiment are more pessimistic.

Although September payrolls surprised to the upside, aggregate hours of work were little changed. Combined with real GDP growth tracking above 3.0% in Q3, this means productivity will remain strong, keeping labor costs and inflation pressures contained. This bodes well for corporate earnings and stock prices.

Shifting from bearish to neutral on the dollar and from bullish to neutral on the euro, pound and yen. With ACWI likely to keep trending higher and yields declining again, we expect to remain at maximum overweight equities, underweight bonds and cash. EM not likely to remain supported by China outperformance, with Latin America and Europe divergent from EM Asia.

Amid record uncertainty before the election next month, NFIB survey shows lack of enthusiasm about the economy. Trade deficit narrows.

A commitment by the PBoC and the Chinese politburo to increase monetary and fiscal stimulus has boosted performance of European metals and mining, and luxury stocks. However, historical precedence and structural issues suggest the China rally and its impact on these industries could be short-lived. We highlight positive developments in indicators for the metals and mining industry but remain cautious on luxury for the time being.

Our historical studies show following the first rate cut front-end yields usually fall in subsequent months and over the course of an easing cycle. Other labor market data have been softer. Peculiarities make the employment report stronger than it was.

The S&P 500 has risen for five months in a row, a rare achievement, especially including seasonally weak September. After five-month winning streaks, the S&P 500 has tended to continue to rally by more than its long-term average. Other indicators like the S&P 500 golden cross and NDR Leading Indicator Model confirm the primary trend is up.

Biggest payroll gain in six moths blows away all estimates. The dip in the unemployment rate to nearly 4.0% and the uptick in wage growth are hallmarks of a healthy labor market. This report tilts in the direction of a 25 bp Fed rate cut next month, instead of 50 bp.

Weekly talking points and key visuals from NDR strategists' insights.

Costco is now offering platinum bars, a potential win-win. A win for Costco looking to extend its success selling gold bars, and a win for platinum buyers, which have seasonality and a bullish model signal working for them. Another positive for Costco is that it has outperformed the S&P 500 in all five prior cases after a second Fed rate cut, expected next month, for both six-month and one-year periods. Costco is the second-largest holding (8.6% weight) in our overweighted Consumer ETF IEDI. While valuation and the port strike are near-term concerns, we take IEDI's large weight in Costco as positive.

The global PMIs showed weaker growth in September, a condition historically associated with less upside in global equities. Strength in the services sector is keeping the global economy safely away from recession, despite pronounced weakness in manufacturing. We do see some upside potential in the months ahead amid more accommodative policies.

NDR has been expecting a softish landing but there is a case for no landing. Cooling labor data is a symptom of weaker demand caused by something else. Conditions that have led to past recessions are largely absent today. There will be a lot of noise in the data until the election is over. But once those uncertainties lift, the economic outlook may be brighter.

ISM Services PMI climbs to highest level since early 2023. Layoffs remain subdued, pointing to continued robust labor demand. Factory orders surprise to the downside.

A larger-than-expected cut by the Fed and new stimulus measures unveiled by China helped lift the S&P 500 to record highs in September. Leadership during the month was decidedly risk-on. The sector model shifted more cyclical at its month-end update.

Consistent with past secular tops, investors extremely exposed to equities, with market cap and net worth ratios at new highs. Market overbought from long-term perspective, but cyclical bull less extended than bulls that preceded previous peaks. Peaking consumer confidence and budget balance peak would make secular top comparisons more relevant.

Most voters say the economy is the most important issue for them. Democrats have done an ineffective job of defending their record during the debates. Republicans have done better in defending Trump's first term. Five of the seven swing states have unemployment rates less than the national average. If you want to get elected, focus on employment, income, and inflation.

The S&P 500's 61% gain puts it the top third of post-war cyclical bulls that lasted at least two years. Negative catalysts have been required for a bull market to end in year three. Large-caps and Growth have tended to outperform in year three, but they are overbought versus small-caps and Value, respectively.

September was decidedly risk-on after a 50 basis point Fed rate cut and a wave of China stimulus put a charge in the market. Outperformance was broad, with 37 of 48 (77%) themes outperforming the S&P 500, the best breadth in 20 months. China Thematic, Travel, Lithium & Battery, and Uranium themes all posted double-digit returns, and all of our recommendations outperformed.

ADP private payrolls pick up, a sign of firmer labor demand. Light vehicle sales climb back, but remain range-bound longer term. Lower mortgage rates support continued pickup in purchase applications.

The Fab Five Sentiment Composite warns of risks. However, some short-term sentiment indicators are partial offsets. Longer-term, margin debt, public selling of regular mutual funds, consumer sentiment, and consumer views of stocks are showing healthy skepticism.

Stocks overcame a choppy Q3 to end at record highs amid broad-based gains. Bonds kept up with stocks. Unusual correlations unfolded, including gold soaring and the GSCI falling and Utilities outperforming in an up market. Value sectors and SMID-caps outperformed in Q3, but Growth and large-caps are still up YTD.

Upgrading our oil view to bullish. The weight of sentiment, macro, and fundamental evidence supports a short-term bullish view. We see a favorable risk to reward ratio over the short-term.

Without much precautionary inventories, a prolonged port strike could cause shortages and higher inflation. Reduced trade flows and knock-on effects across industries could weigh on Q4 GDP growth and employment. Although the strike impact is likely temporary, it could still slow down the Fed easing cycle.

The ISM Manufacturing PMI and most individual activity indexes hold in contraction territory in September. Cost pressures ease. U.S. job openings pick up in August, but falling hires and quits still show cooling labor market conditions. Eurozone inflation falls below target, setting the stage for an October ECB rate cut. Japanese business confidence rises, more BoJ tightening to come.

September PMI data indicated a contraction in eurozone economic activity, but historical analysis shows that once the PMI has fallen below 50, much bad news has already been discounted. Key for European equities is the global economy, and an up-tick in global economic sentiment is a positive development. Further, central bank easing combined with positive seasonality continues to support the bullish absolute case for European equities.

The 1989 disinversion may be the best analog. Yields rose and the economy avoided recession. The curve steepened modestly further. Stocks performed poorly when the disinversion occurred in the early stages of recession. The USD rallied in recessionary disinversions.

Chinese activity stalls, but stimulus boost ahead. Japan's production slumps, but retail sales gain. Some improvement across U.S. regions, but overall sluggish factory activity in September.

The top-level equity allocation soared to 100%. The PMI breadth and Baltic Dry Index indicators turned bullish on equities. U.S. Large Caps, U.S. Value, Emerging Markets, and International Developed each have over 19% weightings.

Our trend indicators and models are bullish on the current uptrend. Stocks have been unfazed so far by unfavorable seasonality and election worries. A strong uptrend, along with a friendly Fed are historically bullish conditions for stocks.

Favorable personal income, consumer spending, and PCE inflation data for August keeps the outlook for the economy positive into yearend. Consumer sentiment improves in September.

NDR Chief Economist Alejandra Grindal notes China's 3 Ds (demographics, deglobalization, debt) makes stimulus less impactful. Still, 9 of 16 indicators on our China Rally Watch report are bullish. We downgraded CSI China Internet ETF (KWEB) in January, but record breadth has it back on our radar. Stimulus won't solve the 3 D's, but a shorter-term "don't fight the PBOC" trade may still work.

Weekly talking points and key visuals from NDR strategists' insights.

The housing inventory shortage is easing, consistent with moderating home price growth. Falling mortgage rates should boost housing affordability and sales. The Fed easing cycle is a tailwind to housing market activity and homebuilder stocks.

Q2 real GDP unrevised at a stellar pace, profits and income revised up.Initial jobless claims decline, as labor demand remains firm.Durable goods orders come in better than expected, a positive sign for capex.

Escalation in the Middle East and a large stimulus package out of China could support the oversold Energy sector. Crude money market short positions have reversed from an extreme high, providing a buy signal for oil. Watching for confirmation from our commodity and sector models.

With secular bull in 15th year, watch for warnings of a peak. Past secular peaks have been reached around extremes in valuations, earnings growth and economic growth. Current secular bull extended but supported by declining interest rates.

Recession Probability Model picks up but is far from signaling a contraction. New home sales pull back in August, but upward trend remains intact. Mortgage applications spike amid falling mortgage rates.

We identify seven thematic ETFs based on a weekly breakout to a new multi-year or all-time high. Infrastructure, Video Games, and Wind stand out as potential upgrade candidates.

We remain overweight U.S. stocks on an absolute basis and relative to bonds and cash. EPS estimates are aggressive for 2H 2024, and the Mag 7 could lead an earnings deceleration in 2025. A backup in interest rates would remove the relative valuation argument for stocks.

After a strong start to the year, China's economy has been slowing. The lack of notable pick-up in economic growth despite significant stimulus suggests that structural factors are at play due to three main factors - demographics, deglobalization, and debt. The long-term downtrend is likely to continue, creating headwinds to China's long-term equity market performance.

We set aside the debate of Bitcoin as a legitimate asset class and look at its price trends to gauge investor sentiment. Bitcoin is first and foremost a high-risk asset making it unlike gold, which can be a safe-haven. Bitcoin can be like gold as a hedge against monetary inflation. We find Bitcoin needs unique financial conditions to thrive, but when it performs well, we expect the S&P 500 to also perform well.

The prior version had a commendable real-time record. The trend and fundamental components held up well, while the sentiment component did not. We kept the indicators that worked and substituted more relevant or modern versions of indicators that did not. We introduce the revised charts and report.

U.S. consumer confidence slides amid weakening business and labor market conditions. Existing home price growth moderates. Richmond Fed manufacturing activity continues to contract. German business confidence remains depressed.

A return in risk appetite toward the end of the year will likely see European Cyclical sectors outperform. Specifically, we see a case for European Industrial stocks given the strong fundamentals identified by our quantitative team and an outlook for accelerating equipment spend. In the very short-term, seasonality and U.S. presidential uncertainty could see continued Cyclical sector weakness.

Robust services activity drives U.S. growth this month. Manufacturing contraction deepens. Flash PMIs elsewhere suggest global growth weakened in September. CFNAI remains consistent with continued U.S. expansion in Q3.

Returns have been historically strong when the trend is positive, and the Fed is friendly. Breadth readings improved following last week's jumbo rate cut. Cycle Composite suggests volatility heading into the election, but strong technicals support the case for a year-end rally.

Fed rate cuts lead to looser financial conditions, which support aggregate demand and payrolls growth, albeit with a lag. Soft landing remains on track. Real GDP growth will likely be somewhat higher than 2.0% this year. Rate cuts create an upward risk to inflation in 2025.