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“The end may justify the means as long as there is something that justifies the end.” – Leon Trotsky

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Was there a debate last night?  Futures are modestly positive this morning despite a very weak earnings report from Nike (NKE) where the stock is down over 15% in the pre-market in what would be the worst one-day reaction to an earnings report since at least 2001. Several economic reports were just released, and the results have generally been positive. Personal Income was slightly stronger than expected, Personal Spending was slightly weaker, and PCE inflation data was right in line with estimates.

In yesterday’s Morning Lineup note we noted that “barring something completely unexpected, it’s hard to see this night being looked back at as a major milestone come November.”  Last night’s debate met the bar. Politico called it the “worst performance of any general election presidential candidate in any debate in modern American history.” NBC News noted that it sent “Democrats into a panic”. A New York Times headline described it as “frightening”, “shaky”, and “halting”. CNN referred to it as ‘disastrous”.  On the other side of the Atlantic, Sky News called it “excruciating” and said that some Democrats described it as a “car crash”,  BBC called Biden’s performance “incoherent”, and The Economist described it as “horrific” and “casts his entire candidacy into doubt”. Keep in mind, that these aren’t publications that are typically known as leaning conservative.

The initial reaction in the betting markets was swift.  As shown in the snapshot from electionbettingodds.com, while Trump’s odds of winning increased 4 percentage points to 59.7%, Biden’s chances plummeted by nearly 15 percentage points to 21.3%.  Interestingly, though, on a generic party basis, Democratics odds declined by just 3.2 percentage points as the chances for a candidate other than Biden on the Democratic side grow.

While the Democratic versus Republican party matchup didn’t move nearly as much as Biden’s odds, it was a big move relative to history.  As shown in the chart below, the odds of a Republican victory in November are right near the highest levels since at least 2022, and the only time the odds were higher was in late 2023.

The reason Biden’s odds had such a large decline relative to Trump’s increase comes down basically to one person- Gavin Newsom.  As shown in the chart below, overnight, Newsom’s odds of being elected in November shot up to 10% for the first time, and he’s now nearly half as likely to be elected in November as Biden!  Obviously, it’s still early and a lot can and will likely change between now and November.  If you identify as Democrat, Republican, or unaffiliated with either party, if you watched last night’s debate, you won’t forget it.

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