Finally election week is here and it can’t come soon enough–I have had my fill of political ads.
Last week the S&P500 continued to move lower as it had the week before–last week by about 1.4% versus 1% the previous week. With many, if not most of the earnings from big tech being released already maybe we will see some relative calmness in the marketplace. On the other hand I don’t know what the election results on Tuesday will do to markets.
Interest rates are the big question for this week. Last week rates moved sharply higher with the close Friday at 4.36% which was essentially the high of the week and 13 basis points higher than the close the previous Friday. Economic news was mixed as has been the case most weeks. Jobless claims were very low and new jobs created in October were also minimal. JOLTs showed a large drop in job openings. While jobs are showing some weakness the PCE (personal consumption expenditure) showed a bit of inflation with the core rate at 2.7% versus forecast of 2.6% and last months reading of 2.7%.
Last week the Fed balance sheet fell by $16 billion–we will fall below $7 trillion this week for the 1st time since Augusts, 2020.
This week we have the double whammy of the election on Tuesday with the FOMC meeting starting on Wednesday with a rate decision, announcement and press conference on Thursday afternoon.
As one might expect we had the average $25/share preferred and baby bond move lower in price last week–by 18 cents/share after moving lower by 19 cents the previous week. Investment grade issues fell by 25 cents, banks by 20 with mREITs off just a penny. On a relative basis income issues remain a little over valued – (maybe around 1%).
The markets have already internalized the election and is forward into the future, any regurgitation challenging a free and fare election may cause a few bumps but Mr. Market plows forward digesting forward earnings on a continual basis as it has done for decades and decades…
Hopefully, the election will be decisively over on Tuesday night. If the election is contested for weeks with legal challenges from either side, we may get unusual volatility in market pricing & rates for some duration of time.
MarketWatch…notes S&P 500 dropped 8% in aftermath of 2000 Bush/Gore contested election.
I think post election lawfare is likely unless there is an overwhelming victor, which seems unlikely. We have had such before and survived. Good luck to all.
I hope market volatility is the worst result of the election.
No more election ads – better than the holiday ad storm already arriving- Ho ho ho.