NDR: Sentiment isn’t ideal for year-end rally

The NDR Daily Trading Sentiment Composite remains in neutral territory, reflecting the market’s tug-of-war between concerns over elevated oil prices, persistent inflation, and slowing job growth, and optimism surrounding strong corporate earnings, AI-driven productivity gains, and resilient economic growth.

Although sentiment briefly fell into pessimistic territory on September 18 with a reading of 30.0 before rebounding to neutral, that low would rank as the second-highest sentiment trough preceding a midterm year-end rally since 1982, well above the historical median low of 15.4 (table above). 

Historically, midterm years have often produced year-end rallies as investor anxiety surrounding potential shifts in Congressional control reaches extreme levels, but the current sentiment backdrop is less supportive than in past cycles. While concerns over election outcomes have frequently created attractive entry points for rallies, history suggests the sustainability of those gains has depended more on whether sentiment became overly optimistic and on the broader macroeconomic environment than on whether control of the House of Representatives changed.  Download the full publication by completing the form to the right.

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