Up and to the Right

November 9, 2020

Market Update 2020-11-09.

Breaking News: Pfizer Vaccine results much better than expected. 90% efficacy!

U.S equity futures are up this morning 4–5%+ following the vaccine news from Pfizer. Treasury yields are higher by as much as 7.0 bps at the long end (10s +6.1 bps to 0.879%) with the US dollar weaker (BBDXY -0.17%).  Rates up, stocks up…Goldilocks.

While the finalized U.S. election results remain delayed, the equity market moved on as expected, rallying into the election. It also moved mightily during the last three days since the vote. The S&P 500 jumped 7% by the time the week wrapped up. NASDAQ was up 9%.

Election results

On the election front, as we outlined previously, historically, elections are more of a swerve on the underlying path for the market, which is chiefly dictated by broader macro trends, not a change in overall trend. For now, here is a summary of the election results.

  • Electoral votes (270 of 538 needed to win): Biden projected 290 vs Trump projected 214. Biden leading in Georgia (16) and Trump leading in North Carolina (15) and Alaska (3). If those results play out, it will end as Biden 306 vs Trump 232. As for the popular vote, Biden received a claimed 75.2 million (the most in history) and Trump received 70.8 (the second most in history).
  • Senate elections (51 of 100 needed for majority): Republicans 48 vs Democrats (and Independents) 48. Republican candidates are leading in North Carolina and Alaska. It’s Republicans 50 (-1 seat) vs Democrats 48 (+1) aggregating the latter. The regular and special Georgia elections are both headed runoff votes on January 5. The Democrats need to win both seats to control the Senate (Vice President-elect Harris would have the tie-breaking vote). Given the initial outcomes (Republicans winning by a thin margin in one and splitting the vote in the other), Republicans should retain control!
  • House elections (218 of 435 needed for majority): Democrats 215 (-4 districts) vs Republicans 196 (+5 districts) with 24 districts’ results pending. Given the leads in these other districts, the Democrats are expected to retain control of the Houses by a narrower margin, however the GOP picked up seats as a big untold story against the progressive left agenda.

Historical repeat?

Based on our analysis of the Treasury TIPS market, we believe that the setup for a reacceleration in the economies real growth rate — and therefore a broadening stock market and resumption of the ongoing bull market — is similar to both 2012, when a Democrat held the Presidency, and 2016, when President Trump won.

Resources

 

Weekly market updates contain general information and expresses views of Oak Harvest Investment Services. Data, Articles, and information cited are believed to be reliable at the time of creation, but are not guaranteed. Nothing in this content is intended as, nor should it be regarded as, personalized investment advice. Strategies and ideas discussed may not be right for you.  Views and opinions expressed may change without notice and do not constitute a recommendation, or an offer or solicitation to buy or sell securities. In addition, Oak Harvest makes no assurance as to the accuracy of any forecast made. Indexes like the S&P 500 are not available for direct investment and your results may differ. Past performance is not indicative of future results. Investing involves the risk of loss.