Happy
Election Day.
Investors made the stock market great again yesterday, as reduced
uncertainty around the election outcome triggered by the Comey letter 2 on
Sunday sparked a relief rally. The S&P, Dow, and the NASDAQ
rose over 2%. The VIX fell by 13% to 19. Treasuries are flat
and oil is off again this morning. Markets are mixed overseas on Tuesday as
investors gear up to watch the election. S&P futures are just
slightly negative.
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LAST
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CHANGE
|
% CHG
|
|
|
18,259.60
|
371.32
|
2.08%
|
|
|
5,166.17
|
119.80
|
2.37%
|
|
|
2,131.52
|
46.34
|
2.22%
|
|
|
1,192.25
|
28.81
|
2.48%
|
|
|
2,403.83
|
13.72
|
0.57%
|
|
Stoxx
Europe 600
|
334.00
|
0.16
|
0.05%
|
|
UK:
FTSE 100
|
6,811.37
|
4.47
|
0.07%
|
|
CBOE
Volatility
|
19.38
|
-3.13
|
-13.90%
|
|
Australia:
S&P/ASX 200
|
5,257.80
|
7.00
|
0.13%
|
|
|
3,125.32
|
-3.62
|
-0.12%
|
|
India:
S&P BSE Sensex
|
27,591.14
|
132.15
|
0.48%
|
|
France:
CAC 40
|
4,459.82
|
-1.39
|
-0.03%
|
|
Germany:
DAX
|
10,443.95
|
-13.00
|
-0.12%
|
|
Italy:
FTSE MIB
|
16,678.71
|
-58.04
|
-0.35%
|
|
Spain:
IBEX 35
|
8,890.00
|
-28.80
|
-0.32%
|
|
|
0.414
|
0/32
|
|
|
|
0.83
|
0/32
|
|
|
|
1.287
|
0/32
|
|
|
|
1.816
|
3/32
|
|
|
|
2.585
|
11/32
|
|
|
|
-0.636
|
0/32
|
|
|
|
0.147
|
3/32
|
|
|
|
44.66
|
-0.23
|
-0.51%
|
|
|
45.94
|
-0.21
|
-0.46%
|
|
|
2.894
|
-0.084
|
-2.82%
|
|
|
350.49
|
-1.26
|
-0.36%
|
|
|
2126
|
-3
|
-0.14%
|
Brexit
drama continues in the UK after the Chancellor of the
Exchequer warned of a 25 billion pound budget deficit (second story).
Chinese president Xi Jinping is shaking up his cabinet,
including the sacking of finance minister Lou Jiwei in a
effort to further consolidate control and boost short term economic
growth. The Chinese trade deficit with the US is shrinking, according to
just released export data.
I’m not sure the polls matter anymore, but the
FiveThirtyEight model’s probability of a Hillary win has moved up to 71.6% on
election day, and the RealClearPolitics Poll average shows the Clinton-Trump
spread at +3.2 points. According to the WSJ, 130 million people are
expected to vote today. The presidential election could be called as
early as 12pm Eastern.
While
the race seems to have gotten more predictable in the last 24 hours, there
are several scenarios which could trigger high market volatility, including a
surprise outcome in the presidential and/or congressional races, and election
that is too close to call or contested. Taking the FiveThirtyEight
model as an example, a one third chance of something happening is not a
especially low probably event. Keep calm and stay invested
during these times. A research piece I read by Bernstein Research this moning showed that in all the presidential elections since 1972, the S&P was on average .7% higer per month in the two months following the election than in the 4 months preceeding it.
Here’s
the news:
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The fluctuations of global markets in recent weeks
along with changes in polling ahead of today's vote clearly show that
the result matters for investors. Bloomberg
has compiled a cross-asset guide of the market moves
analysts say to expect in the event of either candidate winning. A Clinton
victory is good for stocks, the dollar, and would weigh on Treasuries, they
predict. A triumphant Trump would increase stock volatility, hit the dollar,
lift Treasuries, and spur a rally in gold.
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The Institute for Fiscal Studies has warned
that U.K. Chancellor of the Exchequer Philip Hammond is facing a 25 billion-pound ($31 billion) hole in the
public finances following the vote to leave the European Union. Speaking in
parliament yesterday, Brexit Secretary David Davis said there is no going back on the decision to leave,
despite the recent setback in the High Court. Industry frustration with
the British government is growing, as Ryanair Holdings Plc Chief
Executive Officer Michael O’Leary joined the critics, saying, “What worries
me about Brexit is the U.K. government clearly has no idea what it is doing.”
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Turkey's lira dropped as much as 0.6 percent to a record 3.185 to the dollar this morning,
and was trading at 3.174 at 5:38 a.m. ET. The drop came as government
ministers ruled out an intervention to stem the decline, and data showed
that industrial production unexpectedly turned negative in September. Weakening
economic prospects have done nothing to stifle President Recep Tayyip
Erdogan's ambitions, with talk of expanding Turkey's borders aimed
at cementing his power at home.
2
of the 3 most likely election scenarios could cause a stock market sell-off.
In
a note sent out to clients, Nomura's Lewis Alexander and the rest of the
firm's economists said a Clinton victory and Republican control of the
House would be a "non-event" while a Trump victory and a
Republican sweep or a Clinton victory and a Democratic sweep could cause
stocks to tumble by as much as 5%.
The
Mexican peso is slipping. The currency has been used as a proxy to
gauge Donald Trump's prospects of winning the election because of his tough
talk on Mexico. The thought is that a Trump victory would be bad news for
Mexico, causing a weaker peso. The peso is down 0.2% at 18.6289 per dollar.
China's
trade surplus grew less than expected. Exports fell 3.2%
year-over-year while imports dipped 1.4%, making for a trade surplus of 325
billion yuan ($49.06 billion). That was below the 366.6 billion yuan ($51.7
billion) surplus that economists were expecting, according to Bloomberg.
The
Turkish lira hit a record low. The currency tumbled to a record-low
3.1853 per dollar after Turkey's industrial production figure came in at
down 3.1% year-over-year versus expectations of up 2.5%. The lira has
recouped some of its losses and is weaker by 0.2% at 3.1725 per dollar.
Priceline
beats. The travel-booking site earned an adjusted $31.18 a share as
revenue jumped 19% to $3.69 billion. Shares are up
by more than 5% ahead of the opening bell.
The People Speak
After 18 months of the strangest, most raucous, most controversial campaign
in modern history, the U.S. presidential election is where it belongs
today—in the hands of the people. About 130 million Americans are expected
to vote. It’s not only the presidency, but the makeup of the Supreme Court
and control of the U.S. Senate that hang in the balance. By Monday, at
least 42 million people had already cast their ballots, with key states
such as Arizona, Florida and Nevada setting records for pre-Election Day
turnout. Hillary Clinton and Donald Trump crisscrossed the presidential battlefield,
providing a frantic close to a volatile race. We report that Democrats are
favored to regain the Senate majority they lost two
years ago, but the GOP remains competitive in tight contests that have set new spending records. House
Republicans are bracing for near-certain losses, but
Democrats’ hopes of winning the 30 seats needed to control the chamber all
but evaporated in recent weeks. Follow today’s action with key Senate and House races to watch, as well as our guide to early results in the
presidential race. Join us today at WSJ.com for live results and analysis.
China’s Course
Correction
China removed its high-profile, reformist finance
minister, Lou Jiwei, from the post in a shuffle that comes as
President Xi Jinping positions trusted allies in key roles and Beijing
prioritizes short-term growth over major overhauls. The shift put more
senior government posts in the hands of Xi loyalists ahead of a
twice-a-decade Communist Party Congress next fall that will shape policy
for years to come. Mr. Xi’s supporters say he still faces pockets of
political resistance and needs to consolidate power further to enact
meaningful economic restructuring in his second five-year term. Within
China’s political, academic and business elite, however, there are concerns
that Mr. Xi is increasingly focused on hitting growth targets and
suppressing dissent, for instance in Hong Kong, rather than restructuring
the economy and tackling other urgent problems.
Dealing With Tehran
Iran plans to sign a preliminary $4 billion deal with France’s Total on
Tuesday to help develop an offshore gas field, an agreement that would mark
the first Western energy investment there since international sanctions
were lifted this year. Under the deal, Total, China National Petroleum and
Iran’s state-owned Petropars would develop part of a giant gas field in the
Persian Gulf known as South Pars. The agreement could be a harbinger for
the return of more Western companies to Iran’s vast energy industry and
represents a step forward for the Islamic Republic’s goals of ramping up
production of oil and gas over the next several years. But it wasn’t clear
how much of the $6 billion investment would come from Total or how the deal
would be structured for the French oil giant to steer clear of U.S.
restrictions still in effect on Iran.
Stock markets around the world trade
mixed. India's Sensex (+0.7%) led the way in Asia, and Britain's
FTSE (+0.1%) clings to gains in Europe. The S&P 500 is looking to open
lower by about 0.3% near 2,126.
Earnings reports continue to flow. CVS Health, DR Horton,
SeaWorld Entertainment, and Valeant Pharmaceuticals are among the names
reporting ahead of the opening bell.
US economic data is light. JOLTs Job Openings will
cross the wires at 8 a.m. ET. The US 10-year yield is down 1 basis point at
1.82%.
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Did you know there's more going on in the world than just
the U.S. presidential election? If you're like most people, you're probably
having trouble paying attention to other stuff right now. And that's a real
shame, because there's good news out there! Last week I had the
chance to talk to Bloomberg strategist Mark Cudmore, who's
seeing a number of positive international developments. Among the good
signs for the global economy: strong manufacturing data almost everywhere,
firm pricing data, solid real-economy data out of China, and an M&A
boom. What's more, as Cudmore notes, fund managers are sitting on an
unusually high level of cash right now. So that could buoy markets if that
cash gets deployed. So while the U.S. election has filled many people with
dread and depression, there are some important reasons to feel good. Check
out our whole conversation here.
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Source:
Bloomberg, BI, WSJ, FiveThirtyEight.com, RealClearPoltics.com, Bernsetin Research
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