The major polls have Joe Biden in the lead by various amounts, but Wall Street remembers!
After months of waiting (some people have been waiting years), the US Presidential Election will take place this Tuesday. The major polls have Joe Biden in the lead by various amounts, but Wall Street remembers what happened in 2016 when Donald Trump beat Hillary Clinton after the polls had her ahead leading into the election. The number of new coronavirus cases continues to grow in Europe and the US as national restrictions are put into place in Germany, France, Italy, Spain and Ireland. Last week, the BOC, BOJ and ECB were largely as expected, except for an extremely dovish ECB. This week brings the RBA, BOE, and the FED. To end the week, we will get US Non-Farm Payrolls and Canadian Employment Change. Hold on to your hats…this has the potential to be a wild week!
Just 9 months ago, polls showed President Trump with a commanding lead entering the election season. However, along came the coronavirus, and with it the possible beginning of the end for Donald Trump. As the coronavirus daily new cases increased, so did Democratic nominee Joe Biden’s poll numbers. Many say it was because of Donald Trump’s mishandling of the pandemic that led to the swing in the poll numbers. Whatever the reason, Donald Trump is now the underdog heading into Tuesday’s showdown. As you may recall, Donald Trump pulled a rabbit out of a hat in 2016 and beat Hillary Clinton, as stout Trump supporters showed up in droves to vote for him. Can he do it again?
Although election day is Tuesday, most US residents had begun voting as long ago as October 1st via mail and early voting stations because of the coronavirus pandemic. In some states, early voting has already surpassed 2016 voting. According to US Election Projections, more than 80 million ballots have already been cast, which is 58% of the total 2016 turnout. As a result of these early ballots and mail-in ballots, election day may turn into election week or even election month! If there is a decisive winner in the swing states, it may be over quickly. However, the loser of the election may bring the results to the Supreme Court citing anything from mail fraud to international interference. I encourage you to read our special election coverage section on our website and to follow our live blog on election night to keep up to date with our breaking news headlines regarding the markets and our up to the minute analysis.
If the US elections are uncertain and drag-on, that may be the only factor driving the markets next week. However, there still are other topics to watch. Most importantly is the reemergence of the coronavirus in Europe and the US. Some countries in Europe have gone under national lockdown, such as Germany, Spain and France. Other countries have imposed additional national restrictions and curfews, such as Italy, and Ireland. The UK currently has localized lockdowns and restrictions; however, some speculate national lockdowns may be ahead. On Thursday, over 500,000 positive cases were reported worldwide for the day, a new daily record. In the US, up until this point, states impose their own restrictions on restaurants, schooling and curfews. However, if Joe Biden wins the Presidential elections, he has said he will implement national restrictions.
Which brings us to another issue: the next President doesn’t get sworn in until January 20th. Many hoped for a new fiscal stimulus deal by the time election day arrived. If Trump loses, the US may not see one until February. To make matter worse, if Joe Biden wins the election, but Republicans maintain the Senate, it may take even longer for package to get done.
The ECB basically preannounced that they are going to provide more stimulus at their December meeting, when staff projects will be released. The coronavirus is hitting Europe too hard. This week the RBA, BOE, and the FED will meet to discuss monetary policy. Although Australia seems to be on the mend, the effects from the recent bout of the coronavirus as well as friction with China have the RBA committed to buying more bonds further out the curve to keep inters rates low. The US will most likely be on hold on Thursday, as they wait to see who the US President will be for the next 4 years.
Although Brexit is still in the forefront of many people’s minds in the UK and Europe, it will take a back seat to the US elections this week. PM Boris Johnson has even said that he will not make a decision until after it is determined who the next US President will be. Mid-November is the goal to have a deal in place. However, the BOE cannot wait any longer. The Central Bank will provide more stimulus due to the expected fallout from the new round of coronavirus cases. The central bank currently has rates set at 10bps. There is speculation the BOE may cut to 0 bps while setting the table for negative rates.
Last week, 50% of the market cap of the S&P 500 reported earnings. This week, there are an additional 1,356 companies releasing earnings, though most of the big names are already out. Earnings of interest this week are as follows: RYAAY, BRKB, PYPL, MKS, BIDU, QCOM, MRO, SUN, BABA, AZN, SBRY, SQ, TM, GM, UBER, PTON.
In addition to the central bank meetings this week, beginning of month data arrive, including final PMIs and jobs reports from both Canada and the US on Friday. Other important economic data to note is as follows:
Saturday
- China: NBS Manufacturing PMI (OCT)
- China: Non-Manufacturing PMI (OCT)
- ECB: Panetta Speech
Monday
- Global Manufacturing PMIs Final (OCT)
- China: Caixin Manufacturing PMI (OCT)
- US: ISM Manufacturing PMI (OCT)
Tuesday
- US PRESIDENTIAL ELECTIONS
- Australia: RBA Interest Rate Decision
- Germany: Bundesbank Balz Speech
- Germany: Bundesbank Mauderer Speech
Wednesday
- Global Services PMI (OCT)
- New Zealand: Employment Change QoQ (Q3)
- Japan: BOJ Monetary Policy Meeting Minutes
- Australia: Retail Sales Final (SEP)
- Australia: RBA Chart Pack
- China: Caixin Services PMI (OCT)
- EU: PPI (SEP)
- US: ADP Employment Change (OCT)
- Canada: Trade Balance (SEP)
- US: Trade Balance (SEP)
- US: ISM Non-Manufacturing PMI (OCT)
- Crude Inventories
Thursday
- Australia: Trade Balance (SEP)
- Germany: Factory Orders (SEP0
- EU: Construction PMI (OCT)
- UK: Construction PMI (OCT)
- EU: Retail Sales (SEP)
- UK: BOE Interest Rate Decision
- US: Initial Jobless Claims (week ending Oct 31st)
- Germany: Bundesbank Weidmann Speech
- US: Fed Interest Rate Decision
Friday
- Australia: RBA Statement on Monetary Policy
- Germany: Industrial Production (SEP)
- UK: Halifax House Price Index (OCT)
- Canada: Employment Change (OCT)
- US: Non-Farm Payrolls (OCT)
Chart of the Week: S&P 500 Weekly
Source: Tradingview, CME, FOREX.com
Uncertainty – the devil to the stock markets:
- Increasing coronavirus cases
- squaring up ahead of a potential disaster of an election
- lack of guidance from some of the world’s biggest companies
- no US fiscal stimulus plan
As a result, we have a selloff in stocks. The S&P 500 was down nearly 6% last week heading into the first week of November. We have looked at this chart before, but the magnitude of this week’s red candle cannot be understated. After putting in new highs and spiking through the megaphone formation on the weekly timeframe, the S&P 500 pulled back in mid-September. After trying to take out the highs in mid-October, price succumbed to selling pressure, which led to this week’s carnage. Some refer to this price action as an M-Top (it didn’t reach the previous high, therefor it’s not a double-top). The question for traders to answer now is: Is this the beginning of something bigger, or simply a correction in the uptrend? A close below September’s lows at 3198 would suggest there is more downside to come. 3045.5 is a likely target for many, as it is the 38.2% Fibonacci retracement level from the March lows to the September highs. Resistance (prior support) sits all the way up at 3397.50.
There is not doubt this is a huge week with 3 Central Bank meetings, US and Canadian and US job reports, increasing coronavirus cases and beginning of month flows. Add in an uncertain US Presidential Election, which occurs once every 4 years, and you have a monstrous week with the potential for a great deal of volatility!
If you are registered to vote in the US, please make sure to do so.
If you celebrate Halloween, enjoy responsibly.
If you live in the US, remember to set your clocks back 1 hour this weekend.
Have a great weekend and please remember to always wash your hands!
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