Market Briefing For Monday, Nov. 9

Chaos theory should not rattle markets beyond a distraction now, given the normal consolidation anticipated anyway for late in the week just past. Biden has secured the Presidency; although Trump views it as not even on the cusp; even as family members have essentially attempted to do an 'intervention' (of course that media 'leak' may not be worthy; but that's the chatter out there).

Congratulations are in order to President-Elect Biden & VP-Elect Harris.

It's impossible to know if Trump remains, beyond either a sore loser or feeling cheated out of Election, a valid existential threat to transition over the weeks ahead; but it would be characteristic of his litigious nature. That by no means suggests there weren't some voting irregularities; but apparently nothing rising to levels challenging the combination of Popular & Electoral vote dominance; in many ways with less validity (opinion of constitutional lawyers presumed not opining from partisan positions) than how Trump won in 2016 via the Electoral College. Now we'll see if he opposes that system. I doubt this will become any sort of 'Dewey / Truman' situation; and presume this is now essentially a done deal; if it it's yet to be Certified. What matters should be Senatorial toss-ups; as those could really determine what happens with Congress next year. 

Trumpism in various forms will persist. Graciousness for transition would be worthy of celebration but I doubt you'll get that. Earlier in his Administration The disregard of norms partially is what many wanted him to shake-up and he did. For some it was tolerable to a point; and as you know my own view was not that Biden was winning (we're aware of his flaws and missteps years ago); but that Trump was hurting himself; especially after coronavirus fighting efforts transitioned to despair or denial particularly since mid-Summer; and that was the defining factor when it was realized that this wasn't balanced opening of the economy carefully while also exercising reasonable caution.

In any event it's no longer debatable; and we congratulate Joe Biden and to a degree even more-so Kamala Harris (first female Vice President); and to Joe who had the courage to bring her aboard (she had criticized him). I hope indeed Biden is the conciliator he promises; Donald initially offered that as well; but somewhere along the line it diminished. 

This Election was primarily about the economy, taxes and Covid; not the more socially contentious issues. I believe this is evidenced by many Republicans, as they stuck with their Senators and Congressmen in most contested fights, even if they voted for Biden over Trump. 

Candidly I mentioned (even before the vote) that Trump hurt his prospects by an insane delusional denial of proper 'control' of Covid running rampant; and we are still a long way from getting 'control'; no viable vaccine with any proven efficacy (of over 50-60% protection) nearing approval; though those with such limited help in repelling the virus are very close to approval; if not availability.

As to markets; yes, liquidity trumps everything else, but again elections matter in the short-run; not so much for next year (as stimulus and spending are still the expectations by both parties). As (if) we finally get 'antibody therapeutics', that's when the economy can essentially start roaring ahead; and Americans will jump past this absurd debate about using social mingling guidelines or not adhering to simply common-sense precautions.

Executive Summary:

As of now many unknowns surrounding the actual Election are resolved; but generally lots of investment areas will benefit next year. Yes, I expect energy (even with Climate Change back on the front-burner) will rally; it got overly suppressed based on excessive expectations of an oil unwinding. Of course all automakers are going full-steam (pun intended) towards EV or a similarly efficient hydrogen fuel-cell approach; or at least hybrids. However it will still be years before this makes a serious dent in overall consumption; though that is the trend. And as it unfolds and there is presumably less drilling; that's a prospect for Oil prices to actually hold together or even firm. For now that's a positive for sure in certain regions of the Country not just overall markets.

The make-up of Congress might slip 'slightly' towards the Democrats; but it's not a deal-killer with regard to our view of more bipartisanship ..or 'healing' .. as I believe the majority of 'normal' (non-fanatic) Americans want to occur. So we can discuss what sectors benefit in a gridlock divided-government set-up.

Besides energy; technology and many small-caps especially early in 2021; at the same time there's some relief that excessive tax-selling is blunted by the structure of Government as it 'appears' to be unfolding.

• With some history between Biden and McConnell, it's not wishful thinking to expect somewhat better Senate compromises; if not camaraderie; but of course the 2 Senate toss-up situations are more important for 2021 we think, than sputtering (as opposed to collaborative) White House shifts;
• If we get a Fiscal Stimulus 'lame-duck' deal in a few weeks that helps the prospects for a better year-end finish; and that would be under Trump; if he decides to be not just congenial but actually caring about the People;
• I don't envision major impact from early 2020 capital-gains sales; as that's behind as the path towards 2021 tax-changes is eliminated for now; and it is unlikely coming back, 'unless' 2 Senate seats change at a later date;
• With the makeup of Congress, a majority of 'calm' referenced as a desire a couple days ago is seemingly restoring the way things evolve; but there is risk should Trump continue an intrasigent approach in missives beyond letting the lawyers and courts sort-out whatever might be warranted;
• Of course there will be angina with Trumpian efforts to spoil outcomes (a couple may be valid); but this is unlikely to reverse the outcome, even if it is distressing and disappointing to any who hoped for opposite results;
• Again I liked a lot of Trump's policies (many will persist by the way); have all along had a good idea of his earlier persona and mentored (Roy Cohn who I met twice and that was enough), who encouraged a bias to always sue, litigate forever, and never compromise; I mentioned this years ago;
• Ironically now everyone's aware of his 'drive to fight', so his current efforts aren't viewed as different than his lifelong litigious tendencies; though with his aging varied experiences under his belt (no puns about belt visibility) I would think the Nation would be better-off if he pleads his case; and then reverts to a more cooperative urgent approach;
• Meanwhile Covid cases are still rising rapidly; and a President-elect Biden cannot override any of the efforts of the current Administration as yet;
• Ideally President Trump will try to show the American people he cares as to their well-being; and that means focus on fighting the pandemic more than the Courts; seriously this matters over the next couple months;
• Either way; the CDC and FDA need to have backbone to lean forward as relates to science-based guidance and rapid testing or drug approvals;
• Politics needs to take a backseat to health & welfare; and in that area it's indeed reasonable to focus on 'jobs', and funding this 'bridging time' until we have not just vaccines but therapeutic antiviral medications;
• So yes that relates a bit to how Great Britain shunted Churchill aside after World War II; as the focus became a peacetime not wartime economy;
• The United States has been at 'war' with the pandemic; and Pres. Trump himself many months ago described himself as a 'wartime President'; but his declaration of 'turning the corner' cost votes; as we're still engaged;
• I don't want to compare George Bush's declaring 'Mission Accomplished' prematurely after the initial attacks in the Iraqi war; but there is a parallel for people sensing when proclamations of success are premature, or the President's focus shifts beyond the ongoing battles; the majority of Trump supporters aren't defectives who don't see Covid-truths that were denied; so many Trump voters were aghast perceiving retreats in fighting Covid;
• Speaking of 'fights'; one downside of a Biden Administration 'might be' if they try to renew dialogue with Iran rather than continuing present policy; which has helped pull-together presumed strange Mid-East bedfellows;
• There is little doubt 'changing horses' in the middle of trying to assemble a 'new order' in the Middle East is contrary to a successful strategy that a lot of Democrats opposed throughout Trump (and Jared's) efforts;
• Again I am impressed by what Trump achieved; and concerned one part of Biden's ascendancy might return old failed policy directives; as getting a splintered Arab world to mostly make peace with Israel (and unified vs Iran) was one of the greatest achievements of these past years;
• A Covid ‘fall surge’ long predicted by experts seems to have arrived, with the United States reporting over 100,000 new cases daily for the first time in consecutive days late this week;
• Researchers are sounding the alarm after finding a case where a person was able to shed the virus that causes COVID for 70 days despite having no symptoms;
• During the 'lame-duck' session (or sooner); some expect lots of shedding, not of virus (hopefully not that); but of Administration personnel without a President waiting for the end of the 'Term;
• Rumors have likely dismissals ranging from Defense Secretary Esper, to Dr. Fauci; who doesn't directly work for the President, and despite toeing a no-mask line early in the pandemic, was generally accurate although excessively biased (still) towards vaccines over 'antibody therapeutics';
• It won't be productive if Trump starts blaming his own staff or department heads for 'his' shortcomings; although he's tended to behave thusly for a few years; so we wouldn't be surprised if he 'breaks some WH china';
• Sources suggest Biden won't designate Cabinet prospects until after the Electoral College (that could get interesting) meets in December; but we'd be quite pleased if he were to move Dr. Gottlieb or even Dr. David Agus (USC / CBS consultant) to positions of advice or even head-up the FDA or HHS (applies to Dr. Gottlieb as he formerly headed FDA);
• Some of the financially-related staff will remain the same; and I do not see any change to Chairman Powell, who has done a fine job at the Fed; but I know they have unspoken concerns about how to extricate themselves in the future from the very expansive monetary policy (eventual tapering);
• Investors should remain optimistic about 2021; we'll get through the fight victoriously; and likely see better distribution of 'funding' to achieve that; at the same time vaccines are tricky (due to evading mutating viruses);
• Short-term we suspect sensitive but not dramatic oscillations as 'fighting continues' and have no idea if the SCOTUS will have to 'take the point' in resolving the Election disputes;
• Hence either way we envision meandering through this and higher; and I hope we've helped by pointing-out the risks of shorting this market too as well as repeatedly noting Bears were truly 'fighting the Fed' all along.