The View at Two – 2 November 2020

One. More. Day. We are more than ready for this to be over. Both 2020 AND The presidential election. Of course, it may be more than just one day until things are official. Further, the financial implications of the outcome might not be as clear cut as many expect. If the popular narrative of a “blue wave” comes to fruition, we most likely see a weaker dollar, recovery in value stocks and a steepening yield curve. But there are a few other potential outcomes: 1) a contested election which would cause more than a little uncertainty and disharmony - UGGHHHH, 2) A “gridlock” scenario with Biden White House and Republican Senate. The Senate would then act as the last line of defense vs fiscal deficit spending and endanger the market’s anticipated multi-trillion dollar stimulus expectations for Q1. Or 3) Trump repeats a 2016 shock victory. In that case, the Fed policy will be easy, no matter who is in The White House. Also, speaking in strict market terms---according to Macro Man, the performance of the stock market in the first year after a presidential election is pretty indistinguishable, regardless of whether the incumbent party retains or loses power. The returns in one year have been generally pretty good over the past 35 years. No matter what the outcome tomorrow, investors have had plenty of time to position for any of the above results. Perhaps today’s slight squeeze by the S&P and Dow is just further reshuffling. The usual suspects ---tech/large cap/growth names are not feeling the same love. The Nasdaq is underperforming the other 2 major indices for once with Amazon (-2.8%), Apple (-1.4%) and Microsoft (-1.1%) well into the red, despite more than OK earnings last week. One thing to note --- the SPX rarely closes down the day before an election, according to The Market Ear. That said, this year is unlike any other. Deep breaths.