Insights

Top News:

11/02: Election jitters notwithstanding, investors cheered positive manufacturing data across China, Europe, and the U.S. in October.  U.K. became yet another European nation to re-impose a lockdown to stem rising infections.

 

11/03: Amid a dearth of major catalysts, investors appeared to have bid the U.S. stock markets higher on hopes of decisive elections results, even while some have argued against such optimism (here, here).

 

11/04: Investors appeared to have looked past the undecided presidential election, focusing, instead, on the unlikelihood of Democrats regaining the Senate, where one market bull was relieved “the [Biden] tax increase is off the table.”  Adding to market cheers was the U.S. services sector, which continued its recovery in October, albeit at the slowest pace since May. 

 

11/05: As Democrats inched closer to seizing the White House, protracted legal wrangling continued to unfold over vote tabulations.  As expected, the Fed stood pat in its monetary policy, with Chairman Powell adding that further congressional action on fiscal stimulus is “absolutely essential here.” This need is reflected in the latest jobless claims report, which showed that at least 21.5 million people were still receiving benefits in mid-October. U.S. reached record highs both in daily new Covid cases nationally and in hospitalization rates in numerous states.  In Europe, the BOE decided to further inject liquidity into its monetary system to avoid a double dip recession.

 

11/06: Stronger than expected job gains in October lowered the U.S. unemployment rate to 6.9%, while more than half of the jobs lost to the pandemic have yet to be regained amid resurgent Covid cases.

 

 

Heard on the Street:

“Even with this situation, with divided government, which should keep somewhat of a rein on massive growth in government debt, we still see this trajectory as being only one way. So we see real yields extremely low, we see debt still increasing at a fairly rapid pace, and, net net, we still see that being a fairly decent environment for gold investors.”

— Jim Smigiel, CIO at SEI Investments, quoted by MarketWatch on 11/6/2020

 

 

Longer Game:

Should you make 401(k) changes based upon election expectations? It’s ill advised to allow political hunches and emotions drive long-term investment decisions: not only are there no appreciable differences in outcomes under either a Democratic or Republican administration, the picture is decidedly mixed when control of Congress is added into the equation.

 

Regardless of the winners of this election cycle, Neil Howe, a scholar of demography, believes the U.S. is in the middle of a “Fourth Turning,” which may bring about a “secession crisis,” open conflict with China, and inflation.

 

 

Bonus:

Lest there be any doubt that the Fed is a key driver of the stock market, analysts at Société Générale estimated that quantitative easing contributed to 57% of the rise seen in the rate-sensitive NASDAQ index since 2009.