November 6, 2020

A Short Observation

 The results are in, but not all of them, and when the aggregate outcome arrives will it answer why there is so much enthusiasm in the broad markets. One suggestion is the overdone narrative of each presidential candidate leading to the end of the world as we know it, and the other, preferable to my opinion, is the growing potential of further gridlock in Washington. And gridlock translates to less legislative mischief, and that is not necessarily bullish, but more importantly also not bearish.

Which brings me to the markets this week. The uncertainty of the outcome of the election continues as the broad indexes race into positive territory for the year. But is it really that uncertain why? With votes continuing to be counted it appears the red gains in the congress, blue gains, although not enough, in the Senate and the growing likelihood that the next president will be Mr. Biden is reflected in the price action of sectors such as Healthcare, Technology and Industrials, where infrastructure is gaining some confidence.  All this considered, the market gains can also point to some relief that as we move into a new setup in Washington another stimulus package is considered a certainty, although timing is still unclear. Add in the recent October sell off in the broad indexes, creating a positive technical condition for a rally in stocks and some reasonable earnings results true to the season and the potential for continuing improvement in the employment conditions from tomorrow’s Unemployment data release. 

There is much to be optimistic about if none other than the overwhelming need for some peace and the markets are once again in a space that cares about the economy, and it is the economy that affect us all. For now, we are well positioned to participate, with cash to be tactically allocated as opportunities arise. Once again, patience pays off, no reason to stop now.

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