“You better start swimmin’ or you’ll sink like a stone.“ — Bob Dylan

As the race for the White House gets a twist worthy of primetime drama, the stock market is taking a dramatic turn as well. We’re seeing big rotations, in Washington and on Wall Street. Below, I’ll show you how to trade amid these treacherous crosscurrents.

President Biden’s unexpected exit from the presidential race upended the political world. Vice President Kamala Harris, now the presumptive Democratic nominee, has narrowed the gap with former frontrunner Donald Trump. There hasn’t been a disruption in presidential politics this stunning since Lyndon Johnson abruptly dropped out in 1968.

At the same time, the once-dominant mega-cap technology stocks have begun to lag, while value and cyclical stocks, particularly small- and mid-caps, have surged.

The broader economic context remains favorable for equity investors. With economic growth moderating but remaining positive, inflation easing, and the Federal Reserve poised to lower interest rates, market and political volatility present opportunities for portfolio diversification.

The equity markets have continued a rotation that began earlier this month, with value and cyclical sectors outperforming the household names in Silicon Valley. This shift comes after over a year of dominance by large-cap growth sectors, particularly the “Magnificent Seven.” Several factors are driving this rotation.

Cooler-than-expected inflation data, particularly the consumer price index (CPI) report from July 11, has played a pivotal role. The trend was confirmed last week with the latest data for the personal consumption expenditures price index (PCE).

With headline CPI inflation now at 3.0% year-over-year, the markets are increasingly pricing in the likelihood of Fed interest rate cuts in the latter half of this year.

The CME FedWatch tool indicates that three rate cuts are anticipated in September, November, and December. This trend of disinflation, despite fluctuations, supports the broadening of market leadership.

Last week’s stock market action further confirms that rotation is underway (see chart).

Second-quarter corporate earnings season has shown strong performance, with 41% of S&P 500 companies reporting an average year-over-year earnings growth of 9.7%, surpassing expectations. Sectors such as financials, energy, and health care have delivered significant earnings surprises, underscoring the shift in market leadership from technology and growth sectors to value and cyclical sectors.

The valuation disparity between mega-cap technology stocks and the broader market had become pronounced. For instance, the forward price-to-earnings ratio of the technology-heavy NASDAQ was about 35 times at the beginning of July, compared to 16.5 times for the S&P 500 equal-weight index. This valuation gap has prompted investors to seek opportunities in sectors with greater potential for valuation expansion.

The broadening of market leadership appears sustainable. The U.S. economy, while not in an early expansion stage, is on track to maintain positive growth, bolstered by cooling inflation and anticipated rate cuts. This scenario supports the “soft landing” narrative, enhancing the prospects for diversified market leadership.

Market volatility will probably rise in the weeks leading up to the bitterly contested November election, a common occurrence in election years. Historical trends indicate that such volatility tends to subside post-election, regardless of the outcome.

From a market perspective, these political developments have not significantly altered the macroeconomic backdrop. However, they have increased uncertainty and headline risk, which already are causing short-term spikes in volatility.

Through it all, the U.S. economy has demonstrated resilience, with second-quarter gross domestic product (GDP) growth exceeding expectations at 2.8%. Consumer spending, the cornerstone of economic activity, grew at a solid pace of 2.3%. Business investment in equipment surged and inflation continued to ease.

You should focus on fundamentals and use volatility as an opportunity to diversify and rebalance allocations, with an emphasis on smaller stocks and such sectors as industrials, financials and utilities. You should also be cautious about overexposure to cash-like instruments, given the likelihood of lower interest rates.

As major financial and political rotations unfold, it’s sink or swim.

Under the conditions I’ve just described, one sector to consider is marijuana…that’s right, marijuana.

Why are certain cannabis stocks already jumping +1,000%? It has to do with seasonality…specifically, the U.S. presidential election.

It happens every four years. No matter who’s running for office. During the previous presidential election cycle, you had a chance to grab 569%… 1,020%… 2,426% and higher. Now it’s happening again, and you’ve no time to lose.

To find the best cannabis stocks, you need to conduct due diligence. The good news is, I’ve done the homework for you. Want to find the best pot stocks to buy now? Click here.

John Persinos is the editorial director of Investing Daily. He’s also the chief investment strategist of Marijuana Profit Alert.

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This article previously appeared on Investing Daily.