Markets opened up by about 1.5% this morning, with Big Media crediting renewed optimism that Congress and the White House will finally agree on more stimulus.
That’s got nothing to do with it.
The Reality Gap here is that traders and investors are now focused on the election, and the uncertainty that it brings.
Now, it’s not really the uncertainty of who will win that’s got people worried. It’s when and how we’ll know who won that has traders wringing their hands.
Because of the pandemic, record numbers of voters will be voting through the mail rather than in person. That might delay the ballot count, a delay that President Trump has suggested he might ignore.
That’s led traders and investors to worry that we may wake up the day after the election with both camps claiming their candidates won.
But on Friday, investment Goldman Sachs Group Inc. (GS) published a note arguing that this uncertainty was already priced in. JPMorgan & Chase Co. (JPM) made a similar argument over the weekend.
Traders were convinced, and with a sigh of relief went back to trading.
There has NEVER been a better time to be an angel investor. And now New York’s most renowned venture capitalist is opening his deals to the public for the VERY FIRST TIME.
This also means that tomorrow night’s Presidential debate could be a market mover. If President Trump gives any positive signs on accepting the election results, whatever they are, markets will react positively.
Much the same happened almost four years ago now, when Trump gave his original acceptance. At two in the morning, Trump showed he was willing to work with China on trade, rather than taking as hard a line on them as his campaign had made it seem.
Anything that keeps people from worrying and hand-wringing about what happens after the election will help markets. On the other hand, if the President throws more doubt on the election, traders may well start worrying again.
Other than the debate, we have a strangely important earnings week.
Computer chipmaker Micron Technology Ltd. (MU) reports tomorrow after markets close. Semiconductor companies have outperformed the markets recently, and I expect Micron’s earnings to give them reason to continue moving up.
Then on Thursday morning, we’ll hear from both the alcoholic and non-alcoholic sides of the beverage world, as Constellation Brands Inc. (STZ) and PepsiCo Inc. (PEP) report their quarterly earnings.
Pepsi has had a bumpy ride this year, with a deeper pullback than expected. But I’m expecting good results, as a comeback is due and non-alcoholic drinks have fared well during the Covid-19 crisis.
Alcoholic drinks are a different matter entirely. Bars and restaurants have struggled during lockdowns, and are reopening slowly.
So it’s no wonder that Constellation, which sells several alcohol brands, was beaten down when the lockdowns first landed, then regained some strength.
But I expect them to announce a weak forecast for the rest of the year as fall and winter stop outside seating, pushing down beverage sales even more.
Great trading, stay safe out there, and God bless you,
D.R. Barton, Jr.