ELECTION JITTERS:
Recently, the U.S. equity market has followed its normal midterm election year script and begun a pullback. As noted in our Strategy View dated September 13, 2018, normally the stock market corrects in Q3 or Q4 in front of the election by
an average of nearly 10%. Afterward, the equity market erases the drawdown and rallies an average of 7% in Q4. Given the low level of volatility and strong returns in Q2 and most of Q3, it is not surprising that U.S. equities have pulled
back in early October. In addition, a lack of fundamental stock news has also contributed to the recent weakness. This will end as Q3 earnings season begins. Despite the Fed tightening rates and the constant noise from trade talks and
disturbingly partisan politics, we believe U.S. stocks will continue to take their direction from earnings trends.
