Good morning! Fed chief Jerome Powell will speak at 9:30 a.m ET today in a meeting with other policymakers, including Christine Lagarde of the European Central Bank.

At 10 a.m., the May job openings report is due, which economists expect to show further tightening in the labor market.

On deck today: Why Trump could inherit a mega bull market, Tesla’s key delivery report, and another record high for the Nasdaq.

Today’s letter is brought to you by iTrust Capital

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Trump’s bullish set up, in charts

Since last week, Joe Biden has gotten closer and closer to lame duck territory.

After the president’s weak showing in the first presidential debate, betting market odds have spiked for both a Donald Trump victory and a new Democratic party nominee. 

While the stakes couldn’t be higher, all of it could ultimately be gravy for investors. 

If Trump indeed returns to the White House, a handful of trends suggest he could be inheriting a roaring bull market.

The S&P 500, for instance, just capped off its best first-half of an election year in five decades, notching a 15% return. 

That’s a stellar rally for any six-month stretch. But the second half of election years in particular tend to be even stronger for equities. 

Since 2016, the S&P 500 has averaged 14.75% returns annually for a total gain of 218%, with notable rallies after each of the prior two elections.

What’s unusual is how that strength has come with minimal jitters.

The Economic Policy Uncertainty index, which is drawn from news coverage, economic forecasts, and tax code provisions, has trended lower through the first half of 2024. 

In the same stretch, the VIX, known as Wall Street’s fear gauge, has hovered near multi-year lows. 

History suggests both indicators ramp up as a presidential election nears. However, given that each is at a relatively low starting point, upcoming volatility could remain manageable — which can be bullish for equities.

“We are now up over the average return during this time and seemed poised to go higher,” said Jay Woods, chief global strategist for Freedom Capital Markets.

“The biggest gains come right after the election. If the cycle remains true, regardless of outcome, we should see a strong year end.”

Finally, it’s worth taking a moment to reflect on how technology stocks in particular have performed. 

Wall Street’s appetite for AI has propelled names like Nvidia, Microsoft, and Apple to strong showings this year, but looking even further back is instructive.

Remember, meteoric gains for tech stocks are nothing new.

The household names we celebrate today have provided steady and outsized returns for years. 

As the chart below illustrates, the S&P 500’s tech sector has seen 25.9% annualized returns since 2019.

The index as a whole, by comparison, has gained 13.2% per year.

According to Joseph Kalish, chief global macro strategist at Ned Davis Research, tech’s outperformance accelerated in 2016 when Trump took office. 

During his four-year tenure, the tech sector beat the S&P 500 by more than double. 

Now, with Trump’s second Oval Office stint looming and no sign of fatigue for the AI boom, investors could be in for more of the same. 

“Trump supporters point to lower tax rates, higher returns on capital, tariffs, and less aggressive enforcement of antitrust regulations,” Kalish said. “No wonder Elon Musk likes Trump.”

Are you changing your portfolio positioning ahead of November? Hit reply to this email or let me know on X @philrosenn.

*At a glance:

Elsewhere:

📈The Nasdaq starts the quarter with a record. The tech-heavy index climbed 0.8% on Monday, kicking off a second half of the year which many analysts expect to be even stronger than the first. Stocks look good even as interest rates remain above 5%, and economists widely expect the Fed to cut rates at least once by December. (Investing.com)

🇫🇷French stocks are up. European equities climbed as the right-wing National Rally party won the first round of parliamentary elections. Bank stocks in particular saw gains across France, Spain, and Italy, while the “fear premium” on French government bonds eased. (WSJ)

📊Nvidia stock closed higher Monday. The 0.6% gain snapped a two-day losing streak. It was the most actively-traded stock in the Nasdaq 100 and the S&P 500 for the session. This year, shares of the chip-maker are up 151%, easily outpacing each of the benchmark indexes. (Barron’s)

Rapid-fire:

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