WASHINGTON – It’s Sunshine Monday on Wall Street. US stocks are enjoying at least a short-term respite from last week’s violent end-of-October selling squall. But Monday’s brief ray of sunshine quickly became partly cloudy this afternoon. Fear of what may happen on November 3, Election Day 2020?
A partly cloudy Sunshine Monday?
The market’s opening rally soon gave way to some selling, particularly in the major tech stocks. Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Facebook (NASDAQ: FB) and other tech behemoths are continuing to hit the skids, at least as of 1:30 ET.
We expected last week’s selling squall to continue at least through election day. But this market action continues to defy any clear analysis.
What is clear is that “election betting” continues to dominate trading action on Wall Street. That dominance overrides simplistic media commentary blaming it on the alleged coronavirus resurgence. Sure, we can see the increase in “case” numbers, particularly in the Midwest and Great Plains states which were largely spared during Covid-19’s initial wave. But once again, as we have for months, we need to emphasize two interesting developments.
Why are US stocks in such a tizzy right now?
Let’s look at this interesting pair of political and “news” developments that become more interesting each day for US stocks.
- “Cases” mean positive tests, not necessarily active cases of the disease, which, provably, generate significantly lower numbers than “cases.” However, “cases” are popular with the media because “cases” can be used to tar President Trump with negative headlines. Further, it makes sense that we’d see increases in “cases” in more rural areas of the country. Testing has come to these areas later in the game, and some of the allegedly scary numbers result from increased and increasingly effective testing in these areas.
- While the media colludes with the Democrats to create endless coronavirus scare headlines – as one can easily see in Joe Biden’s 1 ½ rambling campaign speeches last week – they continue to ignore most Americans’ real concerns with the economic destruction that’s caused by endless and unnecessary lockdowns. The Trump campaign has picked up on this and added it to the content of Trump’s recent speech-a-thon. Why? It appeals to late-born millennials and the oldest batch of Gen Zers.
Internal GOP polling has noticed that more and more young voters, pre-programmed to vote for Sleepy Joe, are seriously alarmed by more and more lockdowns. They want jobs, fun and a life, are learning that most of them, if they even come down with the virus, will find it about as annoying as a bad cold, and they want to enjoy time with their friends. This is actually turning many of them toward voting for that Very Bad Orange Man.
But so what?
What does this odd pair of developments have to do with stocks? Quite a lot, actually. A great many voters on both sides of the aisle have come to realize that most of what they see on TV channels, cable channels and videos put out by the MSM is a crock. This is making it easier and easier for them to rebel against lockdowns and other restrictions on their freedom of movement and their ability to find jobs.
Significantly, last week’s GDP numbers indicated very strongly that, coronavirus or not, more and more Americans are getting back to work and getting back to spending, Stimulus II or no. Only the highly restrictive Blue State governments are holding their own constituents back. That’s likely to make Trump look bad going into this year’s national elections. Or so these Wrong Way Corrigans think.
Investors endured a nasty, panicked selloff last week, during which a great many investors (including this one) dumped poorly performing stocks to raise cash. The fear? That Wall Street would react very poorly to the outcome of this election, no matter what it might be. This week, however, investors seem to be reassessing and in some cases re-placing their bets, likely on stocks that they think will benefit from the economic policies of the eventual winner.
And herein may lie an important clue to the upcoming election results.
About that Sunshine Monday clue for US stocks
Big Tech continues to take a beating in Monday trading action, while other battered sectors, including oil and banking, are suddenly looking a lot more positive. This comes on the heels of reports that at least a few astute Wall Street bankers (certainly not all) have been placing bets on the GOP via large donations to the party.
Could it be that
- Oil companies suddenly see a clear path toward a Trump victory, meaning that AOC’s “Green New Deal won’t cut their industry off at the knees after January 20, 2021? And / or that…
- Bankers see a big economic revival on the horizon and a possible (and profitable) strengthening of interest rates next year due to that economic revival?
- Tech investors see a Trump victory coming, and now fear some very real – and surprisingly bi-partisan – anti-Trust activity against Big Tech, beginning in 2021?
Certainly, today’s pre-election trading action in stocks isn’t favoring companies that could benefit from a Biden triumph on November 3.
What stocks would actually benefit from big cuts in the military budget, huge tax increases for all, socialized medicine, and a much-larger and totally politicized Supreme Court? And no fossil fuels? We can’t name any.
In short, it’s really 2020’s crucial election cycle that’s dominated stock market action since September of this year. NOT the coronavirus, although the virus continues to be a useful distraction for the left.
What Americans — and investors — really want to see on November 3
Americans don’t like to endure endless restrictions on their lives. That’s something that neither Blue State governors, left-wing media hacks nor Marxist-dominated college professors have yet succeeded in programming out of the average American’s brain.
Perhaps a majority of American voters, or at least an electoral majority, have figured out who’s making all the trouble for them, in addition to passively encouraging all this year’s destructive riots. And it’s neither Trump nor the GOP.
US stocks today are very possibly giving us a clue to Tuesday’s electoral outcome. We’ll learn more tomorrow, November 3. Or, perhaps more likely, days or weeks after an armada of attorneys, professional seditionists and the now definitively conservative-leaning Supreme Court conclude their legal dissection of this treasonous, purpose-designed electoral mess.
Whispers, innuendos and other investor distractions
Meanwhile, forget the whispers, rumors and occasional facts that influence trading action tomorrow and Wednesday (at least). We’d expect stocks to plummet for the next day or two. A quick and violently positive reversal should follow. Like 2016.
Patient investors can stay in if they have a quart bottle of Maalox at hand. Keep it hand for the days following this Sunshine Monday.
Barring that, it’s probably best to pare weak positions today. Raise cash, and get ready to buy into a likely big rally, no matter who wins on November 3. Or, whenever.
One indisputable fact: In most presidential election cycles, no matter who wins, stocks usually stage a big, impressive rally. It’s not necessarily in support of the winner. Instead, it’s a celebration that at least one very big, ambiguous variable – uncertainty – has been removed from trading and investing. At least for a quarter or two. Mr Market always enjoys certainty, even short term. And, hopefully very soon, that’s exactly what Mr Market, and America’s army of 401(k) investors will get.
Whether or not investors like the certainty they’ll enjoy soon… well, that’s another story entirely. And we’ll get to that a bit later. When all the smoke clears. Assuming that the left’s well-funded cadre of brownshirts stop getting paychecks that fund their destruction of America.
– Headline image: Cartoon by Branco. Reproduced with permission and by arrangement with Legal Insurrection.
Modified slightly to fit CDN’s format.