Stimulated. Stocks rose in yesterday’s session on continued optimism over further stimulus, despite Pelosi’s announcement that she would not support the scaled-down package proposed by the White House. New jobless claims for the week missed expectations but continue to slow while continuing claims continue to shrink.
N O T E W O R T H Y
All angles. When games did not require plugging in or Wi-Fi, we had a game called pick-up sticks, also known as jack straws or Mikado in some parts. Most of my readers probably know the game and have played it, for those of you that don’t know the game, here is a primer: you drop a bunch of wooden sticks which land in a pile, all randomly askew of each other. Players then must strategically pick up the sticks without disturbing all of the others in the pile. The winner is the player with the most sticks. Sounds like fun, doesn’t it? I certainly have fond memories of playing it, and for some strange reason, I keep thinking about the game recently. The current state of the investment landscape, is most likely the reason. To be sure, the global economy, the stock/bond markets, and politics have always been a complex puzzle. This year’s events have certainly taken the complexity to a new level, and as we approach a critical election… in the midst of a pandemic, in an economic downturn, with stocks soaring, with an infected-but-almost-healed President, an on-again-off-again-badly-needed stimulus package, record IPOs, a smoldering trade war, too much news real and fake, record bond offerings, interest rates at zero… well… I am sure you get the picture. It is like a big pile of sticks, all intertwined and related in one way or another. If you manage to pull one off successfully, somehow, several more seem to appear on the top of the heap. Yeah, it is complex. At the start of the week we were still digesting last week’s debate melee, the President’s COVID hospitalization, and a badly needed but hotly debated stimulus package… in addition to all the usual stuff like earnings, over and underpriced stocks, new SPACs, new IPOs, mergers, and new bond offerings. One can say that there were some headwinds, if not cross-currents in the markets. Since the beginning of the week the President appears to have recovered his health, the stimulus negotiation was started-stopped-restarted smaller-stopped-and restarted bigger, Biden is ahead in the poles, we had a somewhat civil VP debate, and we got a sprinkling of earnings. Though it wasn’t a straight path, stocks pushed higher. A healthy President is good, but his rapid recovery sends a message that the experimental drugs he was given from Regeneron (REGN) may be one of the keys to eventually containing the awful virus. While the politicians bicker over the size and shape of the next stimulus package all of them seem to agree that a large stimulus package is needed and will likely come after the election, despite the winner. On the election, investors are beginning to factor in a potential Biden win, which would not have been considered market friendly in the past, though it would not have been facts-based. In this climate, investors expect a Democratic win to bring more spending, which the market likes. Interestingly, the market always has a way of finding a direction, even amidst growing complexity and chaos. It has been doing just that for almost as long as the game of pick-up sticks has been around, and it will continue to do so, despite the size and disarray of the pile. Did I forget to mention that next week marks the beginning of Q3 earnings season? That will surely add some sticks to the pile. Stay tuned, stay focused, stay healthy.
THE MARKETS
Stocks traded higher yesterday, despite Pelosi’s balking at the White House’s “skinny” stimulus offer, on optimism that stimulus will eventually come. The S&P500 rose by +0.80%, the Dow Jones Industrial Average climbed by +0.43%, the Russel 2000 Index advanced by +1.09%, and the Nasdaq Composite Index traded up by +.050%. Bonds advanced and 10-year treasury yields remained unchanged at 0.78%. Crude oil rose by +3.10% pushing the energy sector higher. The rise in crude was helped by hopes of a recovery (increased future demand) combined with Hurricane Delta’s impending threat to supply.
NXT UP
- Richmond Fed President Thomas Barkin will speak today.
- Earnings season begins with the banks next week. On the economics front, we will get inflation numbers, regional Fed reports, Retail Sales, and University of Michigan Sentiment. Check back on Monday for calendars and details.