A Democratic sweep at the Midterms is largely priced in IMO.During the 2024 Presidential elections, equity positioning w…

A Democratic sweep at the Midterms is largely priced in IMO.

During the 2024 Presidential elections, equity positioning was at similar levels to now and was tracking closely to earnings growth. Higher earnings, higher positioning.

However there's currently a mis-match where earnings growth is significantly higher large-cap equity positioning per Deutsche.

It therefore feels like ongoing geopolitcal tensions and negative tech sentiment are the bigger overhang on stocks right now.

Both are dancing together in the eye of the storm which we saw yesterday with an initial "Brent down, S&P up" move that later got reversed as people remembered their lingering AI financing concerns.

For the past 5-6 weeks, prediction markets have suggested a Democratic sweep, and as of this morning, Polymarket gives the Democrats a 95% chance of winning the House and a 79% chance of retaking the Senate.

However, I would still expect volatility through the day particularly with the AI complex so highly levered toward U.S. government policy combined with back-to-back weeks of downside pressure.

Doesn't seem like a tasty cocktail (to me) despite Semis currently trading higher pre-market.