This week’s traders will mainly focus on Tuesday election day results after tens of millions of Americans voted at the start of this year’s election.
The October job report, a number of other corporate earnings reports, and a meeting and monetary policy decision by the Federal Open Market Committee (FOMC) are also scheduled for this week.
As many investors have already confirmed, the final results on this year’s election result may not be available quickly after the number of early votes and absentee votes increased during the coronavirus pandemic.
The uncertainty about the outcome due to delays in announcing the results can lead to market volatility in the short term, as many experts have speculated.
“That’s not to say that investors should flee the voting markets. That means investors should prepare, “Anastasia Amoroso, head of cross-thematic strategy at JPMorgan Private, told Yahoo Finance on October 27.” The first thing I would recommend investors to do is stick with their strategic allocation because it’s over Over the coming weeks and months the volatility will subside and then we return to the long term fundamentals which I would say are improving and are somewhat positive at this point in the cycle. “
“But the second thing investors should do is consider making a little profit on some of the tech stocks that have been really good for them, and maybe adding a little hedging, as that, as I said, has the most predictable potential The volatile risk is out there, “she added.
Beyond November, the election will have ramifications for Corporate America as a whole, regardless of which of the possible outcomes results. Changing the control of political parties for a combination of the White House and Senate could increase the likelihood that new laws will be passed changes tax rates for companies increases or decreases Regulations for some industriesand among other things changes the tenor of trade relations with other countries.
The election result is also likely to affect the timing and size of any possible stimulus package to support economic recovery during the ongoing pandemic.
Turning to polls and forecasting markets, Wall Street has been increasingly pricing in the likelihood of a “blue wave” scenario in which former Vice President Joe Biden will take over the White House and the Senate Democrats and keep the US House of Representatives. Last Monday, UBS put the probability of a blue wave result at 55%, followed by a status quo result with a 28% chance, with Republicans holding the presidency and the Senate.
“A Democratic clean sweep is viewed as far from certain, however, as Biden’s projected chances of victory are well below the 80% odds given to Hillary Clinton in 2016,” wrote Andrew Hunter, senior US economist at Capital Economics, in a note Friday. “This suggests that there is still scope for a ‘blue wave’ to drive a rally in the equity markets by raising hopes for further fiscal support.”
“But moving on to another stimulus package is unlikely to be that easy,” he added. “The lack of a filibuster-proof majority in the Senate means that Democrats would have to choose between passing a quick incentive bill or incorporating some of Biden’s longer-term priorities, with the bill taking much longer to pass.”
“There is clearly a risk that the polls will be wrong again. The most obvious alternative is for Biden to win the presidency but Republicans to keep the Senate, ”added Hunter. “In this scenario, the prospects for further tax support would be greatly reduced. Another surprise victory for President Donald Trump, in which the Republicans would presumably also win the Senate, could be received more positively by the markets. But with the Republicans very unlikely to win the house back, the deadlock of recent months could continue. “
From Friday some 85 million people had already cast votes for the 2020 election, according to the US election project maintained by the University of Florida. This amount corresponds to well over half of the total voter turnout in 2016, with days remaining before the election day on November 3 to determine the expected voter turnout highest voter turnout for more than 100 years.
The Federal Open Market Committee (FOMC) will hold the first of its two-day interest rate setting meeting the day after Election Day. A monetary policy statement and press conference by Federal Reserve Chairman Jerome Powell will follow on Thursday.
As with the last few months of meetings, the FOMC is virtually guaranteed that policy rates will stay close to zero as the central bank works to continue to support the virus-hit economy. Actually, after their last meeting in September Central bank officials signaled that interest rates would likely stay at their current levels through at least the end of 2023.
To that end, a commentary on the Fed’s assessment of current and future economic conditions during the coronavirus pandemic will be of greater interest. By doing Federal Reserve beige book The central bank, published at the end of October, underlined that “economic activity has continued to pick up in all districts and the rate of growth in most of the districts has been rated as slight to modest”.
FOMC members have also increasingly escalated their rhetoric, calling for more fiscal stimulus to complement the central bank’s monetary policy support. Powell, in a public appearance in early October, “Too little support would lead to a weak recovery and create unnecessary difficulties for households and businesses.”
Powell is also likely to be asked again Thursday about the Federal Reserve’s assessment of inflationary pressures Central bank officials proposed in September that they “would aim to keep inflation moderately above 2% for some time so that inflation averages 2% over time”. Core personal consumption expenditures that exclude volatile food and energy prices and serve as the Fed’s preferred measure of inflationrose in September compared to the previous year by only 1.5%, stay well below target again during the pandemic.
The upcoming Federal Reserve meeting will also take place after the Fed announced last Friday Lowering the minimum loan size for the Main Street Lending Programto encourage more businesses to take advantage of the pandemic-era assistance facility. Admission to the Main Street Lending Program had previously been weak, with the Fed offering just 400 loans totaling $ 3.7 billion on Friday with a total capacity of $ 600 billion. As many experts have pointed out, many small and medium-sized businesses are prevented from taking out more loans that they would ultimately have to repay during the pandemic.
Job report from October
The Labor Department’s October job report released on Friday is expected to be another piece of economic data that underscores the slowing economic recovery amid the ongoing pandemic.
According to Bloomberg consensus data on Friday, the non-farm workforce is expected to have increased by 600,000 in October. While this would be the sixth straight month of net increases in payroll, it would also be the fourth straight month of a slowdown in jobs being added back to the economy. In September, payrolls outside of agriculture was up 661,000.
The unemployment rate should also fall in October, albeit more slowly. According to consensus economists, the unemployment rate is likely to be 7.6%, after 7.9% in September. At the height of the pandemic in April, the unemployment rate had risen to 14.7%.
As with previous months’ reports, the change in the number of people classified as “permanent job losers” is being closely monitored to measure the longer-term impact of virus shutdowns. In September permanent job losers rose 345,000 to 3.8 million, a jump of 2.5 million from pre-February pandemic levels.
Data from the Department of Labor’s more recent weekly unemployment claims reports have also highlighted the worrying trend towards long-term unemployment among many Americans. Based on last week’s report, more than 387,000 more people have exhausted ongoing unemployment benefits and have entered the federal pandemic unemployment compensation program. This number has continued to rise over the past few weeks, even though Headline new jobless claims tend to be lower.
Monday: Clorox (CLX), Marathon Petroleum (MPC), Wingstop (WING), Estee Lauder (Tbsp) before market opening; Diamondback Energy (CATCH), Paypal (PYPL), Skyworks Solutions (SWSK), AMC Entertainment Holdings (AMC), Mondelez (MDLZ) after the market closes
Wednesday: Hilton (LDS), Sinclair Broadcast Group (SBGI) before market opening; Qualcomm (QCOM), Upwork (UPWK), Fitbit (FIT), Apache (APA), Go Daddy (GDDY), Qorvo (QRVO), Allstate (EVERYTHING), Playgroup (MTCH), Expedia (EXPE) after the market closes
Thursday: Bristol-Myers Squibb (BMY), Mylan (MYL), Regeneron (REGN), Dominion Energy (D.), Hanesbrands (HBI), New York Times (NYT), SeaWorld Entertainment (SEAS), Papa Johns International (PZZA), Yeti Holdings (YETI), Cinemark Holdings (CNK), Cigna (CI), Discovery (DISCA), Duke Energy (DUK), General Motors (GM), Virgin Galactic Holdings (SPCE) before market opening; Take-Two Interactive Software (TTWO), Uber Technologies (ABOVE), Square (SQ), Roku (ROKU), American International Group (AIG), DropBox (DBX), GoPro (GPRO), InterActive Corp (IAC), Caesars Entertainment (CZR), Zillow Group (ZG), Planet Fitness (PLNT), Electronic Arts (EA), Whiting Petroleum (WLL), Peloton (PTON), Booking Holdings (BKNG), T-Mobile (TMUS) after the market closes
Monday: Markit US Manufacturing PMI, October finals (53.3 expected, 53.3 in prior press); ISM Manufacturing, October (55.6 expected, 55.4 in September); Construction spending month after month, September (0.9% expected, 1.4% in August)
Tuesday: Factory Orders, September (0.8% expected, 0.7% in August); Durable Goods Orders, September Final (1.9% in previous press); Orders for durable goods without transport, September finals (0.8% in the previous print); Aircraft Non-Defense Capital Goods Orders, September Finals (1.0% in previous press); Non-defense-related capital goods deliveries excluding aircraft, September final (0.3% in previous print)
Wednesday: MBA Mortgage Applications, Week Ending October 30 (1.7% the previous week); ADP Employment Change, October (688,000 expected, 749,000 in September); Balance of Trade, September (- $ 64.3 billion expected, – $ 67.1 billion the previous week); Markit US Services PMI, October finals (56.0 expected, 56.0 in previous press); Markit US Composite PMI, October finals (55.5 in previous press); ISM Services Index, October (57.5 expected, 57.8 in September);
Thursday: Challenger downsizing in October year over year (185.9% in September); Initial jobless claims, week ended October 31 (746,000 expected, 751,000 the previous week); Continued Claims, Week Ending October 24 (7.756 million the previous week); Non-farm productivity, preliminary 3rd quarter (3.5% expected, 10.1% in 2nd quarter); Unit labor costs, preliminary 3rd quarter (-10.0% expected, 9.0% in 2nd quarter); FOMC rate decision
Friday: Non-Farm Payroll Change, October (600,000 expected, 661,000 in September); Unemployment Rate, October (7.7% expected, 7.9% in September); Monthly average hourly wage, October (0.2% expected, 0.1% in September); Average hourly earnings in September compared to the previous year (4.6% expected, 4.7% in September); Employment participation rate, October (61.5% expected, 61.4% in September); Wholesale stocks month by month, September final (-0.1% in previous print)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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