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<ul class="summary-list"><li>Citi says the election appears to be having a smaller impact on stocks compared to previous years.</li><li>Analysts point to a relatively low VIX reading, a strong market rally, and rotation into pricier stocks.</li></ul>The election tends to have a strong impact on the path of the market in the run-up to the vote, but traders appear focused on other things this year, Citi analysts said. The analysts said several market indicators that normally flash ahead of US elections are notably quiet this year, signaling potentially fewer worries about the election's impact on the market than in past years.Instead of the election, traders are dialing in on the US economy and earnings season, the analysts say."For the lead-up to the US election, equity market behavior has not been in line with previous elections," the analysts said in a Monday note. "Overall, this suggests that other risks, such as US macro, reporting season etc., are having a bigger influence than any perceived election risks."The analysts pointed to the market's continued rally into the months leading up to the election. They note that typically, investors rotate out of equities before the election, making the prior month's performance usually negative.The S&amp;P 500 is down 0.3% in the last month, but in the last six months, it's up 10.7% as it continues a strong bull run. The analysts said that strong performance in the weeks leading up to Election Day is likely due to the strength of US economic conditions, rather than markets taking positions in a "Trump Trade" or a "Harris Trade.""US equities have been very strong coming into this election cycle compared to the past," the analysts said. "The current anomaly has less to do with the market pricing a certain election outcome but more to do with an expectation of continued interest rate cutting combined with a likely shallower US economic slowdown."The Federal Reserve kicked off its easing cycle in September and is expected to continue with a series of 25 basis point interest rate cuts at upcoming meetings. Meanwhile, economists are increasingly expecting a "soft landing" for the US economy, as it dodges a steep recession while inflation continues to edge lower.A relatively low reading on the volatility index is another sign that markets may not be putting too much stock in the election outcome. A low VIX number is rare in election years, the analysts said. "The heightened uncertainty should translate into higher expectation of volatility. Despite this observation, with equity markets making new highs and the VIX being low, it suggests that investors are not too concerned with the election outcome," they wrote.Like past years, though, the analysts said there is a high chance that the market will rally after the election. They said the current market positioning, boosted by mostly solid earnings in the latest reporting season, sets equities up well to rally after the November 5 vote and potentially climb to new highs in the new year.

The stock market's performance shows the election is taking a back seat to the economy, Citi says

Indian companies across multiple sectors have reported disappointing results in the second quarter of fiscal year 2025, notes a new JM Financials report. Consequently, their poor performance has triggered stock price corrections for affected companies. The brunt of this weaker than expected earnings was largely borne by consumer centric sectors like FMCG (fast moving consumer goods), retail, and auto, which slacked largely due to dampened urban demand. For instance, India's largest automaker, Maruti Suzuki, reported a 5% YoY decline in its total domestic passenger vehicle wholesales, largely on the back of pent-up inventory. Similarly, Honda reported a staggering 23% YoY dip in its total sales during October 2024. A recent report by Bernstein noted that around 48% of the companies listed on the NSE100 index missed their earnings estimate for Q2FY25, the highest since March 2020. Most companies have mentioned deteriorated domestic demand, urban slowing, macroeconomic risk, and margin pressures as the main reasons behind the dip. "The quarter's earnings have made investors nervous," noted the JM Financials report. The challenging environment stems from multiple factors: softening consumer demand, rising input costs, and companies' limited ability to increase prices. Moreover, this is not limited to just one quarter. Companies have been reporting weak, single-digit earnings growth for the last six consecutive quarters. Data from India Data Hub also suggests that corporate profits of listed companies plunged by as much as 3.4% during the quarter ended September 30, 2024. This is in stark contrast to the year-ago period, where they had shot up by over 40% The oil and gas sector had a difficult quarter, with refiners hit by weak margins and city gas distributors struggling with higher input costs. Financial institutions showed mixed results. While government-owned banks reported strong numbers, microfinance institutions and some private lenders faced massive difficulties with their unsecured loans. Most notable amongst this was the case of IndusInd Bank, which saw its net profits dip by 40% amidst burgeoning provisions, which climbed 87% to Rs 1,820 crore in Q2, as against Rs 974 crore reported in the year-ago period. <h2>Markets head southwards</h2>The selling trend by FPIs has dragged down the major Indian indices, the Nifty 50 and Sensex, both of which have dropped by around 8% since the beginning of this selling spree in October. According to National Securities Depository Ltd. (NSDL) data, FPIs offloaded equities worth a significant Rs 19,994 crore in just the first five trading sessions of November last week. The impact is clearly visible on Indian stock markets. Data suggests that while every sector in October closed the month in red, auto, oil and gas, and consumer durables were the most badly hit, each declining by as much as 10% during the month. Another indicator underlining the inherent weakness of the market was that the month saw only 242 stocks hit their 52-week high, significantly below the usual monthly average of 310.

India Inc. stares at an earnings dearth in Q2, FMCG, auto, and consumer durables falter

<ul class="summary-list"><li>Expect a re-acceleration of inflation for the rest of 2024 into 2025, says Michael Landsberg.</li><li>High shipping rates and daily living expenses indicate that inflation could be worse than expected.</li></ul>A few months ago, it seemed like the war on <a target="_blank" href="https://www.businessinsider.com/higher-long-term-inflation-outlook-investing-strategy-attractive-bonds-stocks-2024-10">inflation</a> had been won.Wall Street strategists were expecting inflation to continue cooling down into 2025, clearing the way for a series of consistent rate cuts as the Federal Reserve insisted price increases were no longer a threat. In September, the Consumer Price Index (CPI) showed that prices rose 2.4% from last year — closing in on the Federal Reserve's target of 2%.Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, wasn't so sure. He saw signs in the market pointing to a re-acceleration of inflation in the last few months of 2024 and into 2025.Now, it seems like Landsberg may be right. After a Trump victory, concerns about inflation are creeping up again as proposed policies such as <a target="_blank" href="https://www.businessinsider.com/trump-tariffs-hit-company-stock-profits-hardest-china-investing-manufacturing-2024-11">tariffs</a> could push prices up. And as the October CPI report showed, inflation is back on the rise, with prices increasing 2.6% year-over-year. In an interview with Business Insider, Landsberg shared the economic indicators he's watching to monitor inflation and the best way to prepare your portfolio in case of another flare up.<h2 id="7dc40d47-f3ee-4de6-bd68-d838e6c9299f">'Higher for longer'</h2>Inflation could rise to 3% as early as January and hit a mid-3% level in 2025, making it difficult for the Federal Reserve to continue its rate-cutting cycle, in Landsburg's view. He's expecting the Fed to pause rate cuts in December.Landsberg believes the Bureau of Labor Statistics' metrics aren't providing the full inflation picture. He's keeping his eye out on other economic indicators that provide a more on-the-ground look at inflation levels.First, rising Chinese shipping rates are a telling sign of inflation. China is one of the US' biggest trading partners, so an increase in transportation costs between the two countries will likely trickle down and reflect in consumer prices.Geopolitical conflicts in the Red Sea are contributing to the price increases, as shipping companies are forced to detour and choose longer and more expensive routes, according to Landsberg.With <a target="_blank" href="https://www.businessinsider.com/inflation-fed-rate-cuts-red-sea-attacks-panama-canal-shipping-2024-1">12% of global trade</a> passing through the Suez Canal, the Red Sea region is a critical trade route for consumer basics such as oil, cars, raw materials, and electronic components. As a result, these blockades are putting pressure on global supply chains and shipping costs.<div type="image" title="Shanghai Containerized Freight Index" height="663" width="1185" msid="115308890" hostid="261" sizebytes="33696"></div>The Shanghai Containerized Freight Index, which tracks the current spot freight rates for containerized cargo departing from Shanghai, China, has remained elevated in 2024 after spiking earlier this year due to the continued blockade of the Red Sea by Houthi rebels."Shipping costs don't affect margins of companies as much as they're going to affect people's wallets, and that's not getting looked at," Landsberg said.Landsberg also points to the high prices of commodities and everyday necessities. Food prices and rents are still rising. In some East Coast metro areas, rents have risen over double digits since last year, according to <a target="_blank" class="" href="https://www.redfin.com/news/rental-tracker-october-2024/">Redfin</a>.Insurance prices are another strong indicator of inflation, whether it be for cars or <a target="_blank" href="https://www.businessinsider.com/states-most-at-risk-climate-change-rising-home-insurance-premiums-2024-10">homes</a>."Inflation in insurance, which everyone has to have all the time, is up double digits year-over-year," Landsberg said. "That affects people's wallets certainly more than just a printed CPI number."That's not to mention the potential of wage inflation. According to October's employment report, hourly wage growth was up 4% from this time last year. If Trump clamps down on immigration, then that number could go even higher as the supply of workers falls, pushing up the cost of labor.<h2 id="102f3015-2817-4d7e-8b5c-6ea2e030d247">Rebalance your portfolio</h2>Diversification is key in an inflationary environment by spreading out risk between sectors and asset classes, but you might be less diversified that you think, according to Landsberg.One mistake that Landsberg sees investors making is doubling down too much on a specific investment theme. Investors bullish on AI may have devised creative ways to play the AI trade outside of the technology sector, such as buying data center real estate investment trusts and utility stocks. This can give them a false sense of security in their portfolio, as it seems like they're exposed to multiple different sectors.However, if all of your investments across sectors are based on the AI theme, you won't experience much derisking.Landsberg points to the market selloff in August this year, where utilities and real estate indices fared better than technology, but individual real estate and utilities stocks with significant exposure to data centers didn't perform so well."I tell people now that we need to be diversified on themes, not just on sectors," Landsberg said. Some other secular growth themes that Landsberg believes will drive stocks include an aging population, cybersecurity, and alternative energy.In addition to making sure you're sufficiently diversified, there are some other steps that you can take to protect your portfolio from inflation. Landsberg identified a few inflation-benefitting trades such as energy, financials, and <a target="_blank" href="https://www.businessinsider.com/how-to-invest-in-gold-price-record-highs-safe-haven-2024-10">gold</a>.Some funds that provide exposure to these sectors include the Energy Select Sector SPDR Fund (<a target="_blank" href="https://markets.businessinsider.com/etfs/the-energy-select-sector-spdr-fund-us81369y5069?miRedirects=1">XLE</a>), the iShares US Financials ETF (<a target="_blank" href="https://markets.businessinsider.com/etfs/ishares-us-financials-etf-us4642877884?miRedirects=1">IYF</a>), and the Goldman Sachs Physical Gold ETF (<a target="_blank" href="https://markets.businessinsider.com/etfs/goldman-sachs-physical-gold-etf-us38150k1034?miRedirects=1">AAAU</a>)As the end of the year draws near, Landsberg recommends taking a look at your portfolio and rebalancing some positions. If you're overexposed to technology and AI, now is a good time to put money in more inflation-resistant areas.Ultimately, make sure you're investing in high-quality companies with a robust financial profile, he said."You need to have a portion of your portfolio that will do well if inflation starts to move back higher," Landsberg said. "You want companies with pricing power, companies with earnings growth."

Here's how to rebalance your portfolio as these economic indicators flash 'higher for longer' inflation and rates

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The stock market's performance shows the election is taking a back seat to the economy, Citi says

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India Inc. stares at an earnings dearth in Q2, FMCG, auto, and consumer durables falter

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Here's how to rebalance your portfolio as these economic indicators flash 'higher for longer' inflation and rates

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