EDITOR'S NOTE
...as of 10:30 a.m. Eastern time:
(1) Stocks are jumping, tech stocks especially. The Dow's up more than 500 points. The Nasdaq is up almost 4%! Why? No blue wave. No matter the outcome of the presidency, this makes the prospect of major tax hikes (sell your winners, i.e. tech) less likely. It means no killing the filibuster, which could have introduced frequent major policy swings, as we've discussed. It more or less means the "good" kind of D.C. gridlock, in which any big changes require a large consensus, not just a slim majority.
(2) Bond yields are slumping. The 10-year, which ran up to a high of 0.94% early last night when the Democrats' prospects looked more promising, has now slumped to 0.75%. Wow. The reason for that, people say, is much lower odds of any major Covid relief package. Instead of a $3 trillion "blue wave" bill early next year, maybe we get something in the high-hundreds-of-billions. Hence the reflation trade is off, and you see that reflected in stocks as well; the worst performers in the S&P right now are Vulcan ($VMC) and Martin Marietta ($MLM), both down 10%. These are also big infrastructure plays (asphalt, concrete) that ran up big in the past month on blue-wave expectations. Caterpillar is down 6% even as the Dow is up 500-plus points.
(3) It's not just tech--healthcare is soaring. How can the Dow be up this much when CAT is getting crushed? Not only is tech strong (Salesforce and Microsoft are up 5%), but the leadership is actually healthcare. UnitedHealth, the mega insurer, is up 9%; Amgen and Merck are up 6%. Again, no blue wave--meaning no near-term single-payer government healthcare that would have upended the current system. In the S&P, Cigna is up 14% and Anthem is up nearly 10%.
And that's how you know what was priced in for Election Day; as bad as the polls were, the market wasn't that much better. It's not like pollsters expected a blue wave and investors bet on a red one--although you did see the Nasdaq at least start to pop yesterday. That said, we're also coming off the worst week for all the major averages since March.
Today's trading action tells you a lot about where investors had been placing their bets; but less about what the next few years--or even weeks--will truly bring.
See you at 1 p.m!
Kelly
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Rabu, 04 November 2020
Here's what we know...
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