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The Presidential elections risk was finally written down by the markets as election date came. This week showed that whatever the outcome investors just want to move on. We saw huge gains this week and indices regained most of the ground they lost in Oct in just a few days really.
Again an extremely tight race for the seat in the Oval Office this year. The big “blue wave” faded almost totally just ahead of the elections. Many observers write quite drastically about another failure of the polling agencies and their predictive abilities (exactly as it happened in 2016). Anyway, the concerns about a potentially contested election result faded right into the very election day.
-> Monday started with a strong kick-off. Major indices were up 1.5-2%. I saw a couple comments on that day saying basically that it’s actually no big difference who wins for the markets, cos most importantly the Fed pledges its ultra-dovish policy and that is what will drive the markets int he mid-term. Politically i think this sentence (from CNBC) kind of describes the consensus expectations as to the impact of each of the candidates going forward: “a reelection for President Donald Trump would on average favor growth stocks while a win for Democrat Joe Biden could be a positive for cyclical value equities.”
-> The election day turned out to be another squeeze higher (S&P500 +1.8%, Nasdaq +1.9%). Gains were very wide and sound with most sectors up on the day. Some signs of short-covering squeeze were also seen.
-> Wednesday – another rally. Dimming hopes of the Democrats gaining control over both the White house and the Senate kept supporting stocks in general and spurred a risk-on environment. Especially Hi-Techs were well bid as an avoidance of such a scenario generally means no higher corporate taxation and no stricter legal environment for the growth sectors.
-> Guess what…another rally on Thrusday! 😉 The more signs we saw in the media of a potentially split government, the more buyers stepped in to buy the FAANGs and other high-growth companies. It’s hard to name any specifc names that stood out this week, as the market gains were very broad.
-> Biogen (BIIB),a member of the Global Leaders Portfolio (GLP), skyrocketed on Thursday after the FDA report made public ahead of the key Nov 6th advisory panel for Aducanumab supporting the drug’s certification early next year (Biogen’s Alzheimer treatment, which could be the world’s 1st drug for that desease). I wrote about it here. Stock was halted for trading on Friday as the advisory commitee debated. Eventually it decided not to give the drug a nod (which will possibly be seen in th estock’s price on coming Monday), but the FDA can still accept the treatment for public use, if it decides its influence on the patients is positive. the final decision is to be take on March 2021.
-> Also on Friday the shares of Electronic Arts (EA) (also a member of GLP) tumbled 7% as the gamemaker announced a revenue miss for its fiscal 2Q20 ($910m vs. $959m exp). EPS hit 21 cents/shre vs. 3 cents/shre expected.
-> All in all the market ended Friday flat and delivered the strongest week since April.
-> Joe Biden seems to be the next US President as I write it, but the counting still continues, so anything can happen really.
-> Effective weekly index changes: S&P500 +7.3%, Nasdaq +9%, EuroStoxx600 +7%, DAX +8%, Nikkei225 +5.9%.
Other markets events:
-> Bonds: not much action in the curves; the US yield curve (10y-FF) around 70bps, the German curve (10Y Bunds-3M) at 11bps with 10Y Bunds at -0.62%. High Yield Spreads dropped below 5 finally and ended 4.6ish – risk is on.
-> Commodities (ex oil): Gold was down 1.4%on week. The commodity keeps consolidating around the $1900/ounce lvl
-> Oil: rebounced from last week’s plunge and added 4.7% on week.
-> Currencies: dollar was under pressure on the elections uncertainty DXY (Dollar Index) -1.8% on week, EURUSD +2%.
Major macro events: (times are CET; source: tradingeconomics.com):
Next Week’s major macro events:
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