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“People never lie so much as after a hunt, during a war or before an election.” – Otto von Bismarck

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

Election Day is now less than a week away, and for those trying to keep up, below is a snapshot of where the Real Clear Politics (RCP) average of polls stand nationally and in key battleground states this morning compared to how they looked on this same day during the 2020 and 2016 Election Cycles.

As you can see, both Biden and Clinton were up significantly in most battleground states at this point in 2020 and 2016, while Trump is currently slightly ahead in all of the key states except for Michigan, which flipped back to Harris in the last day.

There are any number of ways that either side can analyze or spin the current polling numbers, prediction tools, and betting markets at this point, so we’re simply providing the numbers from RCP and leaving it at that.  Anyone that feels confident that they know how things will turn out should probably just sit back and eat a slice of humble pie.

As shown below, the S&P 500 (SPY) has been mostly trending sideways over the last couple of weeks after a strong start to the month.

The sideways action has allowed the S&P’s 10-day advance/decline line to cool down and move back into negative territory.

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 trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“Prudent investors are now buying stocks in huge quantities and will profit handsomely when this hysteria is over.” – John J. Raskob, 10/29/1929

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

S&P 500 and Nasdaq futures are little changed on either side of unchanged this morning ahead of the 10 AM releases of JOLTS and Consumer Confidence. After the close, we’ll also get several earnings reports including Alphabet (GOOGL), AMD, and Visa (V). This morning, we’ve already gotten reports from companies like McDonald’s (MCD), Pfizer (PFE), and Royal Caribbean (RCL) to name a few.

In Asia, it was a mostly positive night as China was the only major benchmark down on the day, but there were reports that the country is considering issuing $1.4 trillion in new debt over the next few years to stimulate the economy. In Europe, the tone is also modestly positive even as Germany lowered its growth forecast to 2024 from 0.0% down to a decline of 0.2%.

Markets are right near all-time highs as we close out October, but 95 years ago today, the picture looked a lot different as the Dow Jones Industrial Average fell over 12% on Black Tuesday in what was, according to The New York Times, the “most disastrous trading day in the stock market’s history.” Thankfully, no one reading this remembers the day, but selling was so extreme that “prices crumbled under the pressure of liquidation of securities which had to be sold at any price.” The peak of the roaring 20s bull market occurred a little over a month earlier, but the selling on Black Tuesday was the worst to date; fortunes were wiped out in hours. White knuckles lined the bars of bars across the Financial District as wiped-out traders, both mentally and in some cases financially, looked to dull the pain of the crash.

In response to the selling, market officials mobilized and took measures to restore market stability. Margin requirements were cut to 25% from as high as 60 to 70%, and the Federal Reserve Board held an all-day session from 10 AM to 4 PM with most not even leaving “the board room for luncheon.” Despite the weakness, The New York Times noted that the day ended on a ‘cheerful’ note for two reasons. “The first was a late day rally towards the close on tremendous buying by those who believe that prices have sunk too low. The other was that the liquidation has been so violent, as well as widespread, that many bankers, brokers and industrial leaders expressed the belief last night that it has now run its course.”

John J. Raskob, a “leading industrial and political leader” and the man responsible for building the Empire State Building in 1930 in just one year, put a stake in the ground after the close on the 29th declaring that “The present decline in the stock markets of this country has carried prices, in many instances, to levels ridiculously low, with the result that nearly all of the standard railroad stocks are cheap and the industrial list is filled with stocks selling at real bargain prices.” He added that “Prudent investors are now buying stocks in huge quantities and will profit handsomely when this hysteria is over…the pendulum has swung too far.” Think David Tepper going on CNBC to say he was “buying everything” or Jamie Dimon buying 500,000 shares of JP Morgan for his personal account.

While Wall Street’s army of high-powered financiers may have bought the dip, another potentially more important group was throwing in the towel. The headline on page three of The Times summed it up with the headline “Women Traders Going back to Bridge Games; Say They Are Through With Stocks Forever”. The writer described one situation where “a stout woman with chins asked a harassed manager for a quotation, heard it and then remarked: ‘You might at least be a gentleman.’ She went away crying.” In Rhode Island, a man dropped dead in his broker’s office as each tick of the tape took another bite out of his net worth.  In Kansas City, a man at the Kansas City Club told his friends, “Tell the boys I can’t pay them what I owe them,” and proceeded to shoot himself. The Main Street ducks had stopped quacking.

With the ducks no longer eating Wall Street’s cooking, whatever bounce materialized in the market was short-lived. While the Dow managed a 25%+ gain over the following six months, the ultimate bottom wouldn’t be for nearly three more years and 80%+ later in the summer of 1932.

The three-year period from late 1929 through the 1932 lows comprised the dark ages of the US equity market, and for the entire decade of the 1930s, the Dow’s annualized performance not including dividends was a decline of 4.9% (including dividends, the return would have been closer to breakeven). As shown in the chart below, the 1930s was easily the weakest of any decade, but there have been several decades where returns were nothing to get excited about. In the 2000s, the Dow’s annualized performance was negative 1.0%, and in three other decades (1940s, 1960s, and 1970s), annualized returns were less than 3%. The bulk of the market’s gains occurred during the 1950s, 1980s, 1990s, 2010s, and current decade (so far). Overall, for the entire period from the end of 1929 through now, the Dow’s annualized performance was a gain of 5.6%.

Even in the two worst decades of stock market history, the Dow had just as many positive years as negative years, and in every other decade there have been more up years than down years, During the 1950s, 1980s, 2010s, and this decade (so far), 80% of years have been positive, and in the 1990s, the only down year was 1990 (-4.3%). Stocks go up over time, but the climb has been far from a straight line throughout history.