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“The person who is the star of previous era is often the last one to adapt to change, the last one to yield to logic of a strategic inflection point and tends to fall harder than most.” – Andrew Grove
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Futures are little changed this morning but are trading with a positive bias as crude oil rallies and treasury yields move lower. There hasn’t been a lot of earnings or economic news, but with the election tomorrow, polls are a major focus, and news over the weekend, showed the race getting much closer. Just a few more hours left!
While not the most notable news of the weekend, Friday evening’s announcement that Intel (INTC) would be removed from the Dow Jones Industrial Average (DJIA) in favor of Nvidia (NVDA) represents another milestone in the transition of the old to new guard in the semiconductor sector. INTC entered the DJIA 25 years ago in November 1999, and the addition followed what had been a rally of over 900% in the prior five years. If you think that’s impressive, NVDA’s rally over the last five years has been over 2,500%!
INTC’s quarter century in the DJIA was fraught with dysfunction. While the stock initially rallied sharply in the months after it was added, the honeymoon ended quickly. INTC quickly reversed course and lost over 80% of its value. While the stock rallied from 2010 through 2020, it is lower now than it was when it was added. At this point, not many tears are being shed over the end of this union.
The election is just a day away, and with the polls so close between two completely different candidates, it’s understandable to see elevated levels of uncertainty in the market like the VIX’s reading of 22.45. The chart below shows the level of the VIX on the day before every Election Day, both Presidential and Non-Presidential, since 1990. For all years since 1990, the median level of the VIX on the day before Election Day was 18.4, and while you might think that volatility was elevated in Presidential Election years, it was only marginally higher (median: 18.6). This year, the current level of 22.45 ranks as the fourth highest of the nine Presidential Election years since 1990. So uncertainty has ratcheted higher for a year where the VIX has been mostly below average as Americans head to the polls.
Regarding equity market performance, the S&P 500 tends to see positive returns to close out the year after Election Day. For all years since 1990, the median gain has been 3.3% with positive returns 25 out of 34 times. For Presidential Election years, performance has tended to be modestly stronger with a median gain of 3.9% and gains six out of eight times.
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