Morning Roundup

By Mark Masterson on October 30, 2024

Good morning,

Below are the news items moving markets today:

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Executive Summary:

It’s a good news/bad news market this morning….

First – the good news of the morning is private payrolls/hiring were reported far above expectations…..

• US ADP EMPLOYMENT CHANGE ACTUAL 233K (FORECAST 110.5K, PREVIOUS 143K)

The bad news?  Few believe the accuracy of the data because virtually every jobs report has been a beat when initially reported over the past year – then revised lower when nobody is looking one month from now.  We’ll see if this report is any different – but with a week to go in election season – it’s not surprising to see a big “beat.”

Similar result out of the Q3 GDP…..GDP was also a “beat”

• US Q3 GDP (advance) +2.8% vs. StreetAccount consensus +2.6%

More impactful earnings reports on deck for later today and Thursday….40% of the S&P 500 market cap reporting over the next 7 days.  (including 5 of the Mag 7 names)

• Big tech results this week include Alphabet Tuesday afternoon, Meta and Microsoft Wednesday afternoon, and Apple and Amazon Thursday afternoon. Group expected to post slowest EPS growth in six quarters, adding to increasingly subdued sentiment from recent months (Bloomberg)

Here is the calendar….

Earnings Whispers 10 28 24

A few interesting headlines from CNBC yesterday……

• CITADEL’S GRIFFIN EXPECTS DONALD TRUMP TO WIN US ELECTION

How about this below……when even the short sellers are buying – perhaps sentiment is getting a bit hot?

• Short seller Carson Block says “close your eyes and buy” big US stocks, per Bloomberg

An update on the election – just days away now…..

US presidential election:

• With one week to go, presidential race remains too close to call:
  • With only one week to go until the 5-Nov Election Day, it is extremely challenging to call the presidential race one way or another. There has been very little movement in national polling over the past month (Harris holds a slight advantage, 48.2-46.7%, according to FiveThirtyEight ), though of course the electoral college will be the deciding mechanism in the race.
  • Attention has focused on a handful of “battleground” states with extremely divided polling, and which may have a material impact on the race. Most of these remain extremely tight, though the past month has seen some of these move very fractionally toward Trump (Minnesota is the only battleground state that seems to be firming up behind Harris).
  • Multiple forecasters have seen the race tilting toward Trump in these last weeks; for example, FiveThirtyEight‘s model has Trump winning in 54 out of 100 simulations (vs early October’s lean toward Harris in 56/100). However, forecasters have also been quick to note that many tight state races are well within polls’ margins of error and that results could easily flip either way (Washington Post ).
  • Note that there has been a lot of comment on trends in betting markets during this election cycle; betting odds on PredictIt currently favor Trump. However, the prognostic power of these indicators is unknown, and commentators have flagged multiple pitfalls with using these as a tool, including sampling error (Bloomberg).
• Market weighing contrasts between potential Harris and Trump approaches:
  • The candidates are each advocating policy positions that may impact the market, though in different ways. Trump has been seen as the market’s “preferred” candidate given his attitudes toward encouraging growth, furthering domestic energy production, and (especially) curbing regulation. But at the same time, there are fears Trump’s likely push for broader tariffs could heighten global trade tensions, potentially curbing growth and bringing back inflationary pressures.
  • By contrast, Harris is generally expected to remain close to the Biden administration’s policies, broadly favoring labor over capital and potentially increasing regulatory oversight in areas such as energy, healthcare, and tech.
  • Significantly, neither candidate has made deficits or debt a central theme, and each candidate’s policies have the potential to increase government spending at a time when the market is increasingly sensitive to the mounting weight of debt service (see CBO). The next president will also have to navigate “fiscal cliff” issues including the debt limit (currently suspended, back in force on 1-Jan) and the late-2025 expiration of 2017’s Tax Cuts and Jobs Act (TCJA).
  • It should also be noted that a key input for these issues is whether the president will have cooperation from Congress. Polls show some lean toward Republicans retaking control of the Senate, though it remains unclear whether the GOP will retain control of the House. However, it may be worth noting that in 2000, 2008, and 2016, presidents came into office alongside congressional majorities of the same party.
• Battleground status:
  • Pennsylvania (19 EV)
    • RCP polling averages see Trump with a narrow edge, with the most recent statewide poll at Trump +1%.
    • Biden carried Pennsylvania 49.9-48.7% in 2020.
  • Georgia (16 EV):
    • Most recent statewide polls have favored Trump, though a Marist poll from mid-October showed a tie with Harris.
    • Biden carried Georgia 49.5-49.2% in 2020.
  • North Carolina (16 EV):
    • The RCP polling average sits at Trump +0.9%, though three of the past four late-October statewide polls came in at Trump +2%.
    • Trump carried North Carolina 49.9-48.6% in 2020.
  • Michigan (15 EV):
    • Recent statewide polls have been very mixed. RCP sees Harris with a fractional edge. The VP came out on top in three recent polls from Susquehanna (+5%), Quinnipiac (+4%) and Bloomberg (+3%).
    • Biden carried Michigan 50.6-47.8% in 2020.
  • Arizona (11 EV):
    • Trump has led in most statewide polls over the past month, though two larger recent polls (Atlas Intel, Bloomberg) showed a tie.
    • Biden carried Arizona 49.4-49.1% in 2020.
  • Minnesota (10 EV):
    • Harris continues to show an advantage, with RCP showing Harris ~+4%. Recall Harris’s running mate Tim Walz is the current Minnesota governor.
    • Biden carried Minnesota 52.4-45.3% in 2020.
  • Wisconsin (10 EV):
    • Another state which polling shows leaning ever so slightly to Trump (recent Quinnipiac, Bloomberg, and Trafalgar Group polls were tied).
    • Biden carried Wisconsin 49.4-48.8% in 2020.
  • Nevada (6):
    • Harris and Trump have both seen narrow polling advantages in this state over the past month, with forecasters currently giving Trump the slight edge.
    • Biden carried Nevada 50.1-47.8% in 2020.

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Articles of Interest:

• Markets:
  • Options traders positioning for deeper Treasury selloff following US election (Bloomberg)
  • Wall Street strategists remind investors that corporate profits remain paramount to the stock market rally (Yahoo Finance )
  • Asia bonds find favor among investors looking to position for US election volatility (Bloomberg, Reuters)
• Commodities:
  • FOMO sees buyers clamor for gold-backed ETFs as central banks scale back purchases of the precious metal (FT)
  • Industrial metals rise following reports of fresh possible China stimulus (Bloomberg )
• Geopolitics:
  • Israel mulling deal to end the conflict with Hezbollah in Lebanon (Bloomberg, Axios)
  • Ukraine and Russia in talks to halt strikes on energy infrastructure (FT)
  • Trump threatens EU with tariffs over trade imbalance if elected next month (Reuters, CNBC)
  • US and Taiwan set for talks to end double taxation for companies which could increase investment in American chip production (FT )
• Washington:
  • Harris lead over Trump narrows to a single point, 44% to 43% (Reuters)
  • Research shows Trump’s tax cuts led to expanded corporate investment – and a spike in share buybacks (FT )

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Charts of the day:

Sentiment is hot, hot, hot…..

The percentage of US consumers who expect higher stock prices in a year hit a record high.

It’s never been higher.

Remember – when everyone agrees on a certain outcome – often something else happens.

Rosenberg Research 10 30 24

The US Dollar has been moving higher off of the lower range of the channel from the past 3 years.

It’s now in the middle of the channel, and very overbought.  Ready for a move lower?

Interesting that the dollar is hitting these overbought levels right in front of the election and the Fed meeting.  Perhaps those two events will be a catalyst to push the dollar back down?

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Quote of the day:

“As one of the Indianapolis 500 winners said: ‘To finish first, you must first finish.'” — Warren Buffett