Please join Doug Noland and David McAlvany Thursday, October 22nd, at 4:00PM Eastern/ 2:00pm Mountain time for the Tactical Short Q3 recap conference call, “Managing Short Exposure in Extreme Uncertainty.” Click here to register.
The President is diagnosed with COVID-19, with rapidly worsening symptoms prompting a Friday evening Marine One flight to Walter Reed Medical Center. By Monday, he is back to the White House apparently feeling spryer than when he was a man 20 years younger. Reversing course on Tuesday, the President abruptly calls off stimulus negotiations “until after the election.” Negotiations were back on Wednesday, with the administration pursuing piecemeal stimulus (airlines, individual stimulus checks). By midweek the President was referring to his COVID infection as “a blessing from God.”
Thursday President Trump was calling for a “skinny” stimulus package. Friday morning saw the White House suddenly “open to going with something bigger,” and by lunchtime Larry Kudlow was on Fox News saying, “The President has approved a revised package. He would like to do a deal.” Appearing with Rush Limbaugh later in the afternoon, it was “I would like to see a bigger stimulus package, frankly, than either the Democrats or the Republicans are offering.” A little Weird.
Meanwhile, Senate Majority Leader McConnell on Friday stated passage of stimulus legislation was unlikely prior to the election. If the week wasn’t Weird enough, with 54 million watching, a fly lands on the vice president’s head during the VP debate and – to the delight of comedians everywhere – made itself at home for a full two minutes.
At least for now, for the markets it’s Weirder the Better. The S&P500 gained 3.8% this week, its strongest advance in three months. The Banks (BKX) jumped 6.4%, and the Transports rose 5.0%. Curiously, the Utilities gained 4.8%. The broader market outperformed. The small cap Russell 2000 surged 6.4%, with an 11-session rise of 12.8%. The S&P400 Mid-Cap Index gained 4.9% for the week and 11.4% over 11 sessions. Jumping 8.0% this week, the Semiconductors ended the week at all-time highs. The Biotechs (BTK) advanced 5.7%.
Post the presidential debate and the President’s COVID infection, Joe Biden has further extended his lead in the polls. The possibility of a “blue wave” has become real – and markets are fine with it (why do I sense markets would be just as fine with a big Trump lead?). An almost certain reversal of President Trump’s large corporate tax cut (in the event of a Biden win) is apparently more than offset by prospects for mammoth fiscal stimulus. Senator Harris’s more conciliatory comments regarding China stirred the imagination of a more constructive U.S. tone for fraught U.S./China relations. (more…)