DC Today is a daily missive from the Dividend Cafe of The Bahnsen Group. While the Dividend Cafe’s weekly market commentary is meant to be long-form, macroeconomic, and principle-driven, the DC Today’s purpose is to provide a daily synopsis of markets, politics, and current events. It will be short, sweet, and hopefully, informative. Our goal is to bring you the latest and most relevant market information and insights, written only by us. Please feel free to share The DC Today with your friends and family. And of course, we always welcome your feedback as to how we can make it more relevant and practical for you!

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.

Market Action

  • 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.

Economic Front

  • 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.

Public Policy

  • 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.

COVID

  • 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

On deck

  • 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!

With regards,

David L. Bahnsen
Chief Investment Officer, Managing Partner
dbahnsen@thebahnsengroup.com

The Bahnsen Group
www.thebahnsengroup.com

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.

The Bahnsen Group is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.

About the Author

DAVID L. BAHNSEN

Founder, Managing Partner,
and Chief Investment Officer

David is a frequent guest on CNBC, Bloomberg, and Fox Business and is a regular contributor to National Review and Forbes. David serves on the Board of Directors for the National Review Institute and is a founding Trustee for Pacifica Christian High School of Orange County.

He is the author of the books, Crisis of Responsibility: Our Cultural Addiction to Blame and How You Can Cure It (Post Hill Press), The Case for Dividend Growth: Investing in a Post-Crisis World (Post Hill Press) and his latest, Elizabeth Warren: How Her Presidency Would Destroy the Middle Class and the American Dream (2020).

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