Midterm Market Themes
The “Blue Wave” crashed upon an already fragile market backdrop to cause further dislocations. One positive spin could be that months of hedge fund de-risking is being validated by the upswing in volatility post midterms.
The view
Midterm Market Themes: A focus on inclusivity
Yesterday cemented the slow-AI worries emanating from Tuesday’s results. Elsewhere, healthcare and renewables may get a lift (MedTech from more benefits support, pharma from a steady status quo with M&A possibly rushed before 2028, renewables from better sentiment). But with the “Trump put” fading, speculative “new economy” bets could cool, which would favor hedge funds focused on value plays backed by real fundamentals.
Tech: Can we achieve "measured and regulated AI growth" and what does this mean for already opaque ROI and capex numbers? If anything, AI beta will shift with greater fundamental discernment.
Healthcare: The potential for an uptick in benefits support is serving as a positive catalyst in the beaten down MedTech sector due to the potential for increased utilization. Mixed government should maintain the status quo in pharma. M&A could be pulled forward before a "Blue, less M&A friendly Govt" in 2028.
Renewables: The sector has been decimated and fundamentals look poor. Sentiment will at least pickup here helping to stabilize the selloff, which could be followed by regulatory/government support catalysts.
Risk Appetites: The "Trump put" is evaporating and animal spirits that supported speculative price action in "new economy" themes could be tempered by a government placing a lower priority on economic expansion. This dynamic would be favorable for hedge funds as value oriented situations backed by true fundamentals become more sought after than opportunities in the next flying taxi drone, crypto miner, fusion power producer, satellite operator or data center supplier.
This commentary is for informational purposes only and is not a solicitation. Past performance is not indicative of future results. Opinions expressed are those of Masterpiece Advisors, LLC as of the date of this commentary and are subject to change.
Weekly market notes every Friday from Aaron Sweeney after the closing bell.