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Stocks Fall Again; Odds Heavily Favor a Post-Election Rally

This has been an ugly week for the stock market with the Standard and Poor’s 500 index declining 5.6% and all sectors deeply in the red. And also of note, the VIX spike above 40 for the first time in months this Wednesday. Nevertheless, I think risk/reward remains attractive and the odds heavily favor a post-election rally. More on this below.

On the COVID-19 front, in a nutshell, it is spreading and much worse in Europe but mortality is falling. The skeptics would say mortality is low because the virus is making its way to the vulnerable cohorts (lag). Others would point to the "deadwood" issue and many of the vulnerable have already been killed. Therapeutics are far better. And mitigation is better. But the key issue is avoiding the level of policymaker panic that would lead to broad economic shutdowns.

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