Dear Valued Clients and Friends –
I said I was done talking about COVID in the daily market report “for the most part” but for the second day in a row I have a few nuggets to share. I also talked about this very thing with Stuart Varney on Fox Business this morning.
- Futures were pretty much flat last evening and in the early hours of this morning were just modestly positive (no matter how long I have been doing the very early wake-up in New York, I will never get used to seeing futures trading six hours before the market opens). By the time the market opened we were up a bit, and then traded up and down throughout the day. We closed near the low, down -220 points, with the S&P down 0.3% and the Nasdaq up 0.64%.
*FactSet, DJIA, Oct. 27, 2020
- I do believe this story is the most compelling evidence that we are viewing totally predictable short term volatility around the election, stimulus, vol trades, protection trades, and COVID headlines – not real fundamental deterioration.
*Strategas Research, Daily Technical Strategy Report, Oct. 27, 2020, p. 6
Top New Stories
- We know now the stimulus talks are dead, but the final week of campaigning is not. One week to go. Well, maybe.
- Big tech execs are going before a U.S. Senate panel tomorrow to defend the protection afforded to them by Section 230 of the 1996 Communications Decency Act.
- Around the world, economic data for Q3 is coming in (as it will for the U.S. later this week), and it has been surpassing expectations. South Korea’s GDP was up +1.9% for the quarter and Hong Kong saw far better imports and exports than expected. Bank loans in Europe were up +7.1% year-over-year.
- It should be no secret that I believe capex will determine the scope and magnitude of future economic health (build production capacity and efficiency today for more profits tomorrow) … The hit to capex out of COVID has not healed yet, but it normally wouldn’t have this quickly. The next two quarters are important.
*Strategas Research, Daily Macro Brief, Oct. 26, 2020
- Durable goods orders rose +1.9% month-over-month, twice what was expected. August’s numbers were revised higher as well. The +41.5% increase since the April bottom brings us to just 3.7% from the pre-pandemic levels – simply amazing.
- My view, and even the view of my most optimistic source that a deal would get done pre-election, is that the clock has run out. I believe a lame duck deal getting done is preposterous, and while I can’t say it is 0%, I can say the odds are 1%, which is pretty close to zero.
- If the Democrats do not sweep the White House and the Senate, this risky move of Speaker Pelosi will prove disastrous. But if they do, it will end up working fine for the Dems politically, though aid will not get done until March 2021 at the earliest.
- It is very tough to form a take on unverified information, but multiple sources have said Joe Biden is considering Gina Raimondo, Governor of Rhode Island, for Treasury Secretary (should he win the election next week). Raimondo is a former venture capitalist.
Housing & Mortgage
- New single family home sales declined 3.5% in September (just under one million annual rate). This breather comes after four months of gains in sales volume. Sales are still up 32% from a year ago.
- 15,000 scientists and doctors have called for “focused protection for the vulnerable, while those with minimal risk should be allowed to resume their lives.” A significant amount of these elite medical experts are from Stanford, Harvard, and Oxford. A fascinating document filled with medical depth, scientific analysis, and a true regard for economic balance.
- AstraZeneca and Oxford University announced that their vaccine treatment in late stage trials are showing very promising immune response and minimal adverse reactions.
- This chart speaks for itself:
- Many of you have asked if I have felt comfortable with all of the business travel I have done since May when the lockdown ended. We now know that flying on a plane has proven to be one of the less eventful activities in the COVID era in terms of infection risk.
Oil and Energy
- WTI Crude advanced +2.28% (to $39.44) on the day
- Some of you commented (correctly) that though the betting odds show a Biden 65-35 advantage right now, the betting odds showed a larger advantage for Clinton in 2016 a week before the election. That is correct, and the betting odds I shared yesterday were in no way meant to be predictive. Some may argue if they were wrong before they can be wrong again (fair enough), and others may argue by being wrong before bettors and oddsmakers may be more cautious this time around. We shall see.
- The vast majority of S&P 500 companies report quarterly results over the next two weeks.
I am committed to not discussing COVID tomorrow. We’ll see how that goes. I will be on Maria Bartiromo at 6am for you early birds. Have a great night!
David L. Bahnsen
Chief Investment Officer, Managing Partner
The Bahnsen Group
The DC Today features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet. those of HighTower Advisors, LLC or any of its affiliates.