[Market Madness] Edition 0120
Bye Donnie
What’s new
Administrative topics and an introduction
Well folks, this was a stressful week. The league of leading news agencies called the race for the next POTUS yesterday, relieving the people of the agonizing wait, yet likely continuing the rift between avid left-leaning supporters and right-leaning supporters.
Let’s get into the financial news, which lived in the shadow of the election news this week.
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Fundamentals
Where did the markets end last week?
U.S. Indices 5 Day Performance
Dow Jones: +6.89%
S&P 500: +7.36%
NASDAQ: +9.05%
Asia and Europe 5 Day Performance
Nikkei 225: +5.87%
Hang Seng: +6.66%
FTSE 100: +6.02%
DAX: +7.99%
Rates, Spot Prices, and ‘Good to Knows’
U.S. Dollar Index: 92.23
US 10 YR: 0.815%
Crude OIL: $37.38
Spot Gold: $1,950.98
Market Madness Portfolio: +13.40% YTD
TEDRATE: 0.13
LIBOR (3 month): 0.213%
COVID 19 Global Cases: 49,968,373 (updated Nov. 08, 2020)
Weekly update
an article by Christopher
There are several key talking points to cover on this week: COVID 19, financial market performance, economic news, and (of course) stimulus potential. None of these are new, but there seems to be surprises each week. Financial markets rallied this week, having one of the best weeks since April and one of the best single-day rallies since June. It appeared that markets (both U.S., European and Asian) were happy with the result of the election throughout the week, and we will get a sense of how the market reacts (now that election has been called) on Monday. The futures tonight leading into trading tomorrow will give us some indication of where markets will open tomorrow.
Performance could be a toss up this upcoming week if investors turn their focus away from election results and back to the dismal coronavirus news that we saw last week. We’re setting new records (not good ones) for daily new cases here in the U.S. and some countries in Europe are locking things back down. We’ve been warned about bracing for a difficult and deadly winter, and the numbers early into the winter months are showing a glimpse of what we’re going to be up against. Some states here in the northeast have enhanced their mask mandates and are doing everything they can to ensure that folks are taking things seriously. After a few more weeks of case numbers we saw last week, its only a matter of time before critical hospitalizations and deaths start to creep up too.
Stimulus appeared to be hanging in the balance of the election. But with the given outcome, investors are finding the odds of another deal more likely following the transition. McConnell has already hinted multiple times that stimulus is the first agenda item with the Senate is back in session, as it should be. It looks like there could even be a push to get stimulus out the door before 2020 concludes, but knowing how this year has gone, I’d suggest you not get your hopes up. An interesting political note is that Mitch McConnell is one of the only Republicans who went to Joe Biden’s son’s funeral when he passed away some years ago, and some insiders have suggested they have a good professional relationship, which boasts optimism about being able to move the needle on policy if the Senate stays red.
On the economic front, we’re seeing more slight improvements. In the month of October, the economy added 638,000 jobs, bringing unemployment down to 6.9%.
“The job market has now recovered 12.1 million of the 22 million jobs lost in March and April, when the shutdown of businesses led the jobless rate to soar to a post-World War II high of 14.7%.”
“‘In normal times getting 600,000 jobs on a monthly basis would be great,’ said Gregory Daco, chief U.S. economist at Oxford Economics. ‘But in this environment you’re still looking at a recovery that’s going to take a couple of years to get us back out of this hole. If job growth moderates further then we’re talking about three or four years, and that’s a very long time.’” (excerpted from WSJ article)
The lesson here is that economists would like to see a longer-term trend and some consistency before getting too excited about a good month or two. A lot still hangs on the progression or retraction that comes from how the next few weeks of COVID 19 cases present themselves.
Elsewhere, factories have begun to bounce back as consumers began sparking their interest in purchasing goods. This is also beneficial because we are seeing many industries implement protections for the virus and keep up the work, preventing the potential for another round of damaging shut-downs.
As we say time and time again, patience is going to be our best friend as we work through existing challenges and new challenges in the weeks and months to come.
An important announcement from the Fed? Nope.
an article by Julianne
This election has been one for the record books this week. Regardless of who you voted for, we can all agree on one thing: nobody paid attention to the Fed’s November meeting.
No worries, you didn’t miss much. Discussions included continuing purchases in Treasury and mortgage-backed securities and possibly adjusting the composition of these purchases to target longer term Treasury yields. Mr. Powell didn’t love this idea, as their current purchasing program is “very large,” (Jerome’s own words) and already putting downward pressure on longer term yields. After rates were cut in March, the Fed got creative with economic relief including an emergency lending program that expires at the end of the year.
At the end of the day, this meeting was all talk and no action, but officials intended on laying the groundwork and holding off on making a decision on how to proceed until after the election was decided. Going forward, investors expect the Fed to take actions so these relief programs don’t sunset, especially as government stimulus stalls.
Read more here, here, and here.
Quick Takes
To fill in the gaps
Comcast and Walmart to partner to develop and distribute new smart TVs. (via WSJ)
Tesla was on the brink of bankruptcy? (via CNBC)
Praise Fauci! (via CNBC)
Intel’s fall from grace in the chip world. (via WSJ)
The chip manufacturing process leaves the USA. (via WSJ)
Applebee’s franchisee bids to purchase Pizza Hut’s largest operator. (via CNBC)
Attack on Kabul University leaves at least 19 dead. (via WSJ)
A follow up on Quibi’s fall from grace. (via WSJ)
Walmart ditches plan to use Marty-like shelf scanning robots. (via WSJ)
Head of risk to leave Citigroup. (via FT)
AT&T selling dead weight? (via CNBC)
AntGroup shocking pause on IPO sends chills down investor’s spines. (via WSJ)
The global pile of negative-yielding debt. (via FT)
Americans kept their 401(k)’s intact. (via WSJ)
General Banter
What’s on the minds of our editors and writers
*Politics talk warning*
The editors believe this election will mark a significant turning point for the United States moving forward. Seeing election coverage from overseas, it has become apparent the United States’ reputation has been damaged from the lens of many European and Asian countries. This current administration has done nothing to improve those relations, as many have weakened through disagreements between our administration and theirs. All we can do is hope that with a fresh administration and more appropriate people in cabinet positions, we can start moving forward by doing the necessary rebuilding. And there is a lot of rebuilding to do. It is interesting to look back at prior presidential handoffs and see what ‘baggage’ the former president leaves for the president-elect, and this time there is a lot of smelly baggage for Joe and company to clean up before his implementation of new policy and action can begin.
The editorial staff is optimistic that calmer heads will prevail in all of this political unrest and we can start closing some of the largest gaps that drove our American people so far apart these last four years. Whomever you voted for, you did your civic duty and voiced your feelings for what the next step in America should look like, and that is vital to preserving democracy. Free and fair elections are one of the many pillars upon which American democracy stands. Without that (or threatening that we’ve lost free and fair elections) makes us no better as a nation than other nations we instruct holding elections.
Reader’s Corner
A place for suggestions for readers like you
The reader might enjoy this week’s edition of Investor Amnesia, teaching us all a lesson on financial history.
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