With election eve upon us, we thought it would be helpful to share market based presidential election polls along with Greg Valliere's final thoughts.
The graph on the top left shows the price of Trump Media & Technology Group (DJT), which runs Truth Social Media. Truth will be a clear beneficiary if Trump wins and will likely struggle if he loses. The graph shows that the stock was relatively dull until earlier this year when it started to price in the benefits of a potential Trump victory.
Below the DJT graph is the Goldman Sachs basket of stocks likely to benefit from who wins the election. This market poll currently has a clear bet on a Trump victory and a Republican sweep of Congress.
Lastly, on the right are the Polymarket betting odds. As shown, Trump has 62.9% odds of winning, having gained some ground over the last month.
While the market polls seem to have Trump as the winner, Greg Valliere thinks Kamala Harris "will win the presidency by a fraction." We have been sharing a few of this long-time Washington insider's views over the last few months. Accordingly, here are his final election thoughts.
THIS ELECTION IS SO CLOSE that it could be Christmas before there's a final result. It's virtually certain that we won't know the winner on the morning of Nov. 6, the day after the election. A winner has to be declared by noon on Jan. 20.
IT'S POSSIBLE THAT HARRIS WINS COMFORTABLY -- she even may make a last-minute push in Florida -- and it's possible that Trump may win Pennsylvania, and thus the election.
BUT THE MOST LIKELY OUTCOME IS A PHOTO FINISH -- Harris by a fraction in a race that may not be settled until there's a resolution of at least 8 or 9 recounts. The big winners will be the lawyers.
What To Watch Today
Earnings
Economy
Market Trading Update
Last week, we discussed the break of the rising wedge pattern.
"Unsurprisingly, the market stumbled a bit this past week, breaking the "rising wedge" pattern to the downside. However, the market continues to find buyers at the 20-DMA as portfolio managers are unwilling to be "out of the market" currently."
Such remained the case this week until it didn't. On Thursday, the market cracked the 20-DMA and swiftly fell to retest the 50-DMA. There is an important lesson in this week's action. Over the last several weeks, we have warned about the weakening of momentum and relative strength and the triggering of the MACD "sell signal." However, many followers commented that the market kept rising despite my warnings and "this time was different." The lesson is that while technical analysis is NOT perfect, the signals derived from the analysis are often a good process to follow. As always, "timing" is the most difficult challenge. The indicators told us that the market would likely "derisk" before the election, which is now evident.
As we have repeated, while the market was set up for a short-term correction, the backdrop remains bullish. Thus, we expect momentum to carry into year-end. However, here is an interesting data point from Goldman Sachs trader Brian Garrett, which was pointed out this past week.
"Between the lows of October 2023 and the highs of October 2024, the SPX rallied over 40%.What is almost unprecedented about this rally is that it was achieved on a realized volatility of ~12, yielding a "Dirty Sharpe" ratio above 3. Such has only happened previously in ’95, ’97, and pre “vol-mageddon” in 2018."
To put that into layman's terms, the last 12 months have been one of the greatest risk-adjusted yearly returns in market history.
What should be noted is that such low-volatility, exuberance-driven rallies eventually end. They lack the appropriate catalyst. As we concluded last week:
"There is currently little risk of a bigger near-term correction. However, some things could cause one, like a highly contested presidential election. In the current political environment, such is not a low-probability event. As such, while we remain allocated to the markets, we are closely monitoring the amount of risk we take."
In other words, don't forget to manage risk.
The Week Ahead & The BLS Employment Report
The closely followed BLS employment report was well below economists' expectations, but the market reaction was remarkably muted. The twin hurricanes likely played a significant role in the shortfall of new jobs. The graphic below shares the disclaimer issued by the BLS. The BLS reported that the economy added 12k jobs versus expectations of 115k and last month's revised 223k. Moreover, August's gain of 159k was revised lower to 78k. The unemployment rate was flat at 4.1%.
The election will be the most critical market driver of the week. However, if it is contested and a winner isn't declared immediately, it could have a lasting impact for weeks. If Trump wins, as the market polls believe, we will likely see some of the Trump beneficiaries continue to do well. However, a Trump trade reversal could occur if Harris wins, as Greg thinks is possible. As we said a few days ago, buckle up!
As if the election weren't enough news to digest, the Fed will meet on Wednesday and likely reduce rates by 25bps. They will also signal whether another 25bps in December is possible. The bond market will have to absorb a 10-year auction on Tuesday before the election and the Fed, followed by a 30-year auction on Wednesday. Both auctions will likely create some bond market unease as Wall Street will be asked to buy bonds with the Fed and election results unknown.
Corporate Buybacks: A Wolf In Sheep's Clothing
Corporate buybacks have become a hot topic, drawing criticism from regulators and policymakers. In recent years, Washington, D.C., has considered proposals to tax or limit them. Historically, buybacks were banned as a form of market manipulation, but in 1982, the SEC legalized open-market repurchases through Rule 10b-18. Although intended to offer companies flexibility in managing capital, buybacks have evolved into tools often serving executive interests over broader shareholder value.
This article explores the mechanics of buybacks, how they impact markets, and whether they truly return capital to shareholders—or merely enrich insiders.
Tweet of the Day
“Want to achieve better long-term success in managing your portfolio? Here are our 15-trading rules for managing market risks.”
Please subscribe to the daily commentary to receive these updates every morning before the opening bell.
If you found this blog useful, please send it to someone else, share it on social media, or contact us to set up a meeting.
The post Market Polls To Help Handicap The Election appeared first on RIA.
Full story here Are you the author?You Might Also Like
Exuberance – Investors Have Rarely Been So Optimistic
2024-11-12
Investor exuberance has rarely been so optimistic. In a recent post, we discussed investor expectations of returns over the next year, according to the Conference Board’s Sentiment Index. To wit: “Consumer confidence in higher stock prices in the next year remains at the highest since 2018, following the 2017 “Trump” tax cuts.” (Note: this survey was …
Residential Construction Jobs At Risk
2024-11-05
The number of residential construction workers has almost doubled since the aftermath of the financial crisis and housing bust. The graph below on the left shows that after a brief hiccup during the early days of the pandemic, the number of jobs in residential construction continued to rise despite higher interest rates. Moreover, the job …
Corporate Buybacks: A Wolf In Sheep’s Clothing
2024-11-01
Corporate buybacks have become a hot topic, drawing criticism from regulators and policymakers. In recent years, Washington, D.C., has considered proposals to tax or limit them. Historically, buybacks were banned as a form of market manipulation, but in 1982, the SEC legalized open-market repurchases through Rule 10b-18. Although intended to offer companies flexibility in managing capital, buybacks have evolved into tools often serving executive interests over broader shareholder value.
This article explores the mechanics of buybacks, how they impact markets, and whether they truly return capital to shareholders—or merely enrich insiders.
The Rise of Corporate Buybacks: By the Numbers
Since 2003, U.S. corporations have spent over $11 trillion on share repurchases. Corporate
Agency REITs For A Bull Steepener
2024-09-25
In our recent two-part series on the yield curve (Part One Part Two) we discussed the four predominant yield curve shifts and what they imply about economic activity and monetary policy. Additionally, given the current bullish steepening trend of the yield curve, we provided data on how prior bull steepening environments impacted various stock indexes, sectors, and factors. Missing from our analysis was a discussion of a specific type of REIT whose valuations are well correlated with the shape of the yield curve. If you are buying this bull steepener, agency REITs are worth your consideration.
What is an Agency Mortgage REIT?
REITs own, manage, or hold the debt on income-producing properties. REITs must pay out at least 90% of their taxable profits to shareholders annually. This
50 Basis Point Rate Cut – A Review And Outlook
2024-09-24
Last week, the Federal Reserve made a significant move by cutting its overnight lending rate by 50 basis points. This marks the first rate cut since 2020, signaling the Fed is aggressively supporting the economy amid a backdrop of softening economic data. For investors, understanding how similar rate cuts have historically impacted markets and which sectors tend to benefit is key to navigating the months ahead.
In this post, we will explore the historical market performance following similar 50-basis-point rate cuts, highlight the best-performing sectors and market factors after such cuts, and outline three critical risks investors should be aware of heading into year-end.
Historical Outcomes To Rate Cuts
A 50-basis-point rate cut, especially the first one, is an aggressive
Yield Curve Shifts Offer Signals For Stockholders
2024-08-28
The level of U.S. Treasury yields and the changing shape of the Treasury yield curve provide investors with critical feedback regarding the market’s expectations for economic growth, inflation, and monetary policy. Short- and long-term yields have recently fallen, with short-term maturities leading the charge. The changes result in what bond traders call a bull steepening yield curve shift. The shift is due to weakening economic conditions, moderating inflation, and the increasing likelihood that the Fed will lower rates.
Yield curves are essential indicators that bond investors closely follow. However, many stock investors do not track yield curves despite the importance of bond yields on stock returns. Therefore, in this two-part series, we start with an introductory discussion of
Overbought Conditions Set Up Short-Term Correction
2024-08-27
As noted in this past weekend’s newsletter, following the “Yen Carry Trade” blowup just three weeks ago, the market has quickly reverted to more extreme short-term overbought conditions.
Note: We wrote this article on Saturday, so all data and analysis is as of Friday’s market close.
For example, three weeks ago, the growth sectors of the market were highly oversold, while the previous lagging defensive sectors were overbought. That was not surprising, as the growth sectors of the market were the most exposed to the “Yen Carry Trade. “
We saw much the same in the Risk Range Analysis (Note: both sets of analysis presented are published weekly in the Bull Bear Report).
As explained in the weekly report:
Two critical points. First, three weeks ago, many sectors and
Market Decline Over As Investors Buy The Dip
2024-08-20
The market’s 8.5% decline during August sent shockwaves through the media and investors. The drop raised concerns about whether this was the start of a larger correction or a temporary pullback. However, a powerful reversal, driven by investor buying and corporate share repurchases, halted the decline, leading many to wonder if the worst is behind us.
However, the picture becomes more nuanced as we examine the technical levels and broader market conditions. While the recent bounce suggests the market decline may be over, risks remain—particularly with the November election looming. Let’s dive into the details.
The August Decline: What Caused It?
August has historically been volatile for markets; this year was no exception. A combination of factors drove the S&P 500’s 8.5% drop:
Tags: Featured,newsletter
