1. Moving the markets

Yesterday’s rally continued based on hopes that a clear winner would emerge from today’s election and that a much-feared contested result could be avoided.

MarketWatch saw it this way:

The bounce back from the worst week since March is supported by bets former Vice President Joe Biden will beat incumbent President Donald Trump, and Democrats at the same time will take control of Congress, raising the possibility of further financial relief for businesses and individuals stricken by the COVID-19 pandemic, analysts said.

Of course, the opposite outcome is presented via headlines like this:

“JPMorgan Sees S&P Tumbling To 2,500 In Case Of Blue Wave, Surging To 3,900 If Red Wave”

Most shorted stocks were squeezed thereby adding power to the rally, with SmallCaps leading the way, closely followed by the Dow.

ZH presented an interesting stat in that a rising market has tended to precede a victory for the sitting party 86% of the time since 1928, a theory which proved spot on in 2016:

Amid all the polls showing Hillary Clinton’s dominant lead over Trump, the equity benchmark fell for nine straight days before the election week, cementing its three-month performance into negative territory.

Gold put up a nice performance supported by a falling US Dollar, thereby erasing last week’s plunge and climbing back above its $1,900 level.

In the end, uncertainty reigns, and should tonight be contested, history from the year 2000 disputed election suggests that bonds will rally while stocks get slammed, according to ZH.

Looking at the big picture in this entire idiocy of fake news and market manipulation, I agree with Buckminster Fuller, who said:

If you take all the machinery in the world and dump it in the ocean, within months more than half of all humanity will die and within another six months they’d almost all be gone; if you took all the politicians in the world, put them in a rocket, and sent them to the moon, everyone would get along fine.

1. Moving the markets

Prophecies about which of the two Presidential contenders would give Wall Street more of what it needs to keep the bullish dream alive, namely continued reckless money creation, prompted ZH to post this succinct summary:

After reading months of ridiculously goalseeked Wall Street commentary, where first a Trump victory was the best outcome for stocks (at a time when Trump was seen as a favorite to win), then a Biden victory becoming the best-case outcome for risk assets (this predictably emerged around the time Biden took a lead in the polls), then a Blue Wave emerging as the most bullish outcome (around the time a Democratic sweep became the most likely outcome according to polls), and then following a brief detour when Wall Street briefly freaked out about Congressional gridlock when a split Congress suddenly became an all too real possibility, we went full circle and a Trump victory once again became the most bullish outcome (according to JPMorgan), traders and analysts would simply roll their eyes and snicker whenever a new “scenario” emerged from Wall Street’s strategy desks.

Yes, what it comes down to is this: Additional gloom and doom and catastrophes seem to guarantee the world only one thing, that is MORE STIMULUS! It’s pretty sad to realize that economies and fundamentals no longer matter with stock markets around the world being powered only by the generosity of those in charge of monetary policy.

Be that as it may, traders were relieved that the month of October did not turn out worse than what we saw, optimism prevailed, and the major indexes rallied into November. Lagging the bunch was the tech sector, which dipped into the red mid-day but managed to recover in the end.

The bullish theme was in part inspired by perceptions that maybe, just maybe, we were oversold last week, and that we might be electing someone tomorrow without much feared delays. Given recent reports, that indeed would be a tall order.

Gold performed well today, with GLD up almost 1%, and that in the face of a rallying US dollar, which as of late has taken the starch out of Gold’s upward momentum. I am not sure yet, if this is a harbinger of things to come.

Certainly, I expect market volatility to skyrocket, should the election outcome be postponed.