Election Results and Bull Markets

Despite election volatility, Evercore ISI reports that election outcomes don't typically end bull markets. Their analysis spans 100 years, demonstrating that key market indicators are economic, not political.

Key Indicators to Monitor

Evercore highlights three conditions that may signal the end of a bull market:
1. Onset of recessions
2. "Irrational exuberance" in valuations and market behavior
3. Uncooperative Federal Reserve policy

Currently, Evercore sees no signs of a looming recession:
– Weekly jobless claims are below 300,000, indicating ongoing economic growth.
– Credit spreads for both high-yield and investment-grade bonds remain near post-pandemic lows, showing economic stability.
– Internal surveys are in "struggling" territory at 47.6, above the 45 threshold historically linked to recessions.

Valuation Insights

While current valuations stand at 24x trailing twelve-month earnings, they have not reached the concerning historical level of 28x TTM. As long as there are no major speculative trends in IPOs or M&A activity, which are not present now, expensive markets can yield gains for up to 18 months.

Federal Reserve Policy

The Fed remains in a rate-cutting mode, which the strategists note could shift market dynamics. The true impact may come from stickier-than-expected inflation.

Market Outlook

Overall, Evercore asserts that the bull market remains intact. They predict potential outcomes for the S&P 500 post-election: either a “melt-up” to 6,500 or a sell-off.

Investment Recommendations

Evercore advises investors to:
– Maintain an overweight position in Technology and Communication Services, especially software and biotech.
– Invest in small-cap equities.
– Consider defensive positions in Consumer Staples and Health Care.