Welcome to MktContext. We cut through noise with thoughtful macroeconomic commentary and tactical market research. Written weekly for wealth managers and active investors to navigate today’s stock markets.
Current market timer: Bearish
With the midterms done, markets swung wildly this week and caught many investors (including ourselves) off guard.
After the election results came in, investors removed their hedges, and in doing so created an overnight short-squeeze that lasted all of Wednesday.
By Thursday, the reality of the Democratic “blue sweep” set in: devastating for the AI complex. Markets reversed all of the prior day’s gains and more.
Nasdaq fell 6.5%, slicing through its 200-day moving average. SPX fell 4.3%, the largest one-day drop since Liberation Day in April 2025. Volatility spiked and correlations surged. Stocks abandoned their rotational flow and moved down together.
This may be the end of the rotational market. We’ve been waiting for this to confirm a deeper selloff. Our portfolios had been 40% cash for several weeks, insulating us from the downturn. By Friday, we were 70% cash.
The AI complex has been selling off since June. Mag 7 joined in October. And now, the broader market is starting to crack. Fundamentals and earnings are deteriorating, and the midterm elections may have just made it worse...
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