Nov 5, 2020
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“Information is not knowledge.” – Albert Einstein
When you turned on your TV to one of the financial networks or cable news channels this morning that wasn’t your DVR showing yesterday’s news. The election still hasn’t been decided and equities are once trading sharply higher. Over the course of the last 24 hours, not much has really changed. The path for the President is looking increasingly narrow, and markets seem to be content with the prospect of gridlock.
In economic news, both initial and continuing jobless claims came in modestly higher than expected. Non-farm productivity was a bit weaker than expected, and Unit Labor Costs were less bad than forecast. While it was easy to overlook given all the other news, don’t forget that there is also an FOMC decision this afternoon!
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, election analysis, trends related to the COVID-19 outbreak, and much more.
After the worst pre-election week for the S&P 500 in its history last week, it only makes sense that the S&P 500 would be on pace for one of its best-ever election week performances on record. It is 2020 after all! With futures indicating a 1.5% gain at the open, the S&P 500 is on pace for its second-best election week performance since 1928. To find the best election week performance for the S&P 500 on record, you have to go all the way back to 1932 when FDR won in a landslide.
An interesting trend to note about recent election cycles is that they have become increasingly volatile. Going back to 1996, the S&P 500’s average percentage move the week before Election Day has been a move of +/-3.6%. That’s more than twice the average pre-election move of the prior 17 election cycles going back to 1928. Similarly, the S&P 500’s average election week performance has been a gain or loss of over 4%. Likewise, that’s also just about twice the prior average of election cycles spanning 1928 to 1992!
With all the information investors have had at their fingertips in the last 25 years, you would expect that it would dampen volatility in reaction to big events like elections, but the data of the last 25 years since Netscape – the first mainstream internet browser – was launched shows a much different outcome. Information is often confused with knowledge, but as Einstein succinctly put it, the two aren’t the same.
Nov 4, 2020
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“The poll that matters is the one that happens on Election Day.” – Heather Wilson
Americans were expecting a wild election night, and that’s exactly what we got. Heading into the results, it was Biden’s election to lose. As early state results came in the odds skewed heavily towards Trump, but overnight and early this morning the odds started to turn in Biden’s favor where they remain now. With all the uncertainty, you would guess that futures would be trading lower, but they’re up across the board with the Nasdaq leading the way. Republicans holding onto the Senate makes the reflation trade less attractive, and that is pushing down interest rates and pushing growth stocks higher.
In economic news, the Employment picture turned a little darker as the ADP Private Payrolls report for October missed expectations by a wide margin as the economy created just 365K jobs compared to expectations for growth of 634K.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, some election analysis, trends related to the COVID-19 outbreak, and much more.
With the outcome of the election uncertain and legal challenges looking increasingly likely, we are immediately reminded of the uncertainty that surrounded the aftermath of the 2000 election. Most of us remember how poorly the market traded during that period, but in the chart below we show the intraday chart of the S&P 500 in the three days that followed the election. In those three days, the S&P 500 traded down more than 4.5%. What’s interesting to note is that in the opening minutes of trading the day after Election Day, the S&P 500 actually opened the day higher before sellers stampeded in.
This will be a key indicator to watch in trading today. Futures are currently firmly in positive territory this morning, and much more positive than they were in 2000 the day after that election. If those early gains can hold, a nightmare scenario of November and December 2000 will look increasingly less likely.
Nov 3, 2020
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I have an idea about voting, how about on every ballot we include “None of the above”. Imagine if you won the election but lost to ‘None of the Above’. Wouldn’t that make you re-think your positions?” – Jesse Ventura
Futures markets are indicating a continuation of the 2016 market script we discussed yesterday, and polls have shown some signs of tightening up in some battleground states. Will there be another Election night surprise this Election Cycle? Stay tuned. Economic data is on the light side today, but there’s a steady pace of earnings after the close.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, key earnings data from the US and Europe, trends related to the COVID-19 outbreak, and much more.
Former North Carolina senator and presidential candidate John Edwards made the theme of ‘Two Americas’ popular in 2004 and 2008 in terms of the United States increasingly becoming a country of haves and have nots. Within the equity market as well, we also see the theme of ‘two markets’ playing out. Starting with the S&P 500, the index bounced off support yesterday after its worst full-week performance leading up to a Presidential election in its history. The S&P 500 already made a lower high in October, so any bounce here that fails to take out the high from October will result in a second lower high.
For the Russell 2000 – an index which heretofore had been underperforming the S&P 500 by a wide margin – the technical picture looks more positive. When the broader market rallied in September and early October, rather than make a lower high, it actually made its second higher high. Then, in the subsequent pullback, it found support at its uptrend off the March lows, making what could turn out to be a higher low. The seemingly constant underperforming Russell 2000 now looks like more of a leader than the S&P 500.
Nov 2, 2020
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“The whole framework of the presidency is getting out of hand. It’s come to the point where you almost can’t run unless you can cause people to salivate and whip on each other with big sticks. You almost have to be a rock star to get the kind of fever you need to survive in American politics.” – Hunter S. Thompson, Fear and Loathing on the Campaign Trail ’72
After the worst last full week of trading heading into a Presidential election in more than half a century, futures are trading significantly higher this morning as Election Day is less than 24 hours away. That’s a pretty good description of the market this morning, but surprisingly enough, it’s also the exact same thing you could have said four years ago on the Monday morning heading into Election Day 2016. Back then, the S&P 500 was down 2% in the last full week of trading heading into Election Day and rallied sharply in the two days heading into the election results on November 8th.
This election cycle, the S&P 500 is once again indicated to open up over 1% following what was the worst ever last full week of trading for the S&P 500 heading into an election. Will history continue to repeat itself over the next 36 to 48 hours? About half of the population really hopes it does, while the other half really hopes it doesn’t. Regardless of the outcome, hopefully, we’ll know the answer tomorrow night…or Wednesday…or this weekend…or at least the end of the year!
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, key earnings data from the US and Europe, economic data, trends related to the COVID-19 outbreak, and much more.
For the sake of comparison, we wanted to see how close 2016 and 2020 really have been to each other, so in the chart below we compare the S&P 500 in the year leading up to the last Friday before Election 2016 and now. 2020 is plotted on the left axis, while 2016 is on the right axis. One major difference between the two periods is the level of volatility. In 2016, the S&P 500 ‘only’ fell about 15% from its peak earlier in the year, while this year we saw a decline of more than 30%. But once you get past the differences between the size of the moves, there are some similarities in the patterns. In both cases, the S&P 500 bottomed from a significant decline in Q1, rallied sharply until late Spring, pulled back in June, and then rallied for the remainder of the Summer. In both years, once election season rolled around in September, the market pulled back right up through the Friday before Election Day. As the saying goes, history does not repeat itself but it often rhymes.
Oct 30, 2020
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“My model for business is The Beatles. They were four guys who kept each other kind of negative tendencies in check. They balanced each other and the total was greater than the sum of the parts. That’s how I see business: great things in business are never done by one person, they’re done by a team of people.” – Steve Jobs
Investors had been looking warily forward to last night’s earnings reports for several days now as several of the largest companies in the world reported their Q3 results. While the reaction to the reports hasn’t been positive, it could have been worse. Futures are indicating a decline of almost 1% at the open, but that is actually more than 1% off the lows.
On the data front, both Personal Income (0.9% vs 0.4% est) and Spending (1.4% vs 1.0% est) topped expectations, while the Employment Cost Index came in right in line with forecasts (+0.5%).
Given it’s month-end, there could be some volatility today, but don’t expect much in the way of news to clear the haze regarding any of the short-term issues facing investors.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, key earnings data from the US and Europe, economic data, trends related to the COVID-19 outbreak, and much more.
With futures currently indicating a decline of over half of one percent today, the S&P 500 is on pace for a decline of 5% this week. For the year so far, this would rank as the worst week since March and the fourth-worst week of the year. Between rising COVID cases around the country, next week’s election, and lackluster reactions to solid earnings reports, there are more than a few concerns on the minds of investors heading into the last two months of the year.
Oct 29, 2020
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“It’s not what happens to you, but how you react to it that matters.” – Epictetus
We got some big economic numbers this morning as Q3 GDP rose at an annualized rate of 33.1% versus forecasts for growth of 32.0. This is obviously a record number, but when a 33.1% gain follows a 31.4% drop, you’re still almost 10% in the hole. Jobless claims also dropped this week as both initial and continuing claims dropped to post-pandemic lows. So far, the initial market reaction has been positive. Futures were higher overnight, reversed all of those gains and more heading into the report, but have now moved back into positive territory after the releases.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, key earnings data from the US and Europe, economic data, trends related to the COVID-19 outbreak, and much more.
Even for a big down day like yesterday, there was a pretty decent amount of technical damage within the market as the percentage of stocks trading above their 50-day moving average (DMA) dropped from 46.1% down to 27.4%. Heading into this week, more than two-thirds of stocks in the S&P 500 were above their 50-DMA, today it’s less than a third, and based on where the futures are now, it may be less than a quarter by the closing bell.
The last time there was a lower percentage of stocks above their 50-DMA was just back at the September lows when it bottomed out at 25.5%, and before that, you have to go back to the Spring to find lower readings. All in all, readings like the current one represent oversold conditions but aren’t especially rare.
