For this publication, a ‘Democrat sweep’ is defined as a Biden victory and Democrat-controlled Senate. A blue wave scenario is defined as a Biden landslide win plus a 6-8 seat swing in the Senate. A Democrat sweep could result in relatively benign policy changes, while
Control of the Senate is the largest near-term macro issue for markets. Expectations for large-scale fiscal spending under a Democrat sweep scenario drove a ~3 week rally in equities. This started on 9/24 when a sell-side equity strategist used a $5T+ spending estimate by simply
Equity markets continue to price significant risk of a contested election outcome. The best indication comes from the VIX futures market where both the November and December VIX futures trade at a premium to October.
The S&P 500 (SPX) remains above its previous technical resistance zone/now support at ~3420-3450. A break below ~3420 would change our near-term expectation for a successful test of the ~3581 high. We’re also closely following the S&P 500 Value Index (SVX) as it hovers just
We’ve stayed bullish on US equities during the retracement and beyond based on a number of factors still in place today. The most compelling factor is ultra-easy financial conditions. Interest rates are at 0%, 10-year bond yields are below 1%, money supply is growing at
At the moment, the S&P 500 (SPX) is on track for a third consecutive lower daily close on gloomy COVID headlines and more realistic US fiscal stimulus expectations. After successfully holding technical support at ~3220, the SPX rallied ~9.5% in three weeks and moved from
Sell-side analysts tend to lower estimates during a quarter, but Q3’20 was one of the rare instances when the opposite occurred. Over the last 15 years, there’s only been three other times when analysts have raised estimates during the quarter.
: Biden’s rising poll numbers have reduced concerns over the potential for contested election results. Investors are still positioned for volatility around election day, but not much further with December VIX futures now priced lower than the November contract. Biden’s wide lead has also driven
Previews of Q3 earnings season focus on elevated expectations based on increased estimates during the quarter. Tomorrow morning kicks off the start of earnings season with results from BLK, C, DAL, FAST, FRC, JNJ and JPM.
The consensus 2021 S&P 500 EPS estimate has quietly climbed from ~$165 to ~$168 over the last three weeks. Without any positive impact from fiscal stimulus or vaccines, the number seems destined to surpass $170 by the end of the CQ3 earnings season. Analysts typically
