"Iffy" October behind us. But election uncertainty likely weighs on much of November. Array ( [cookie] => 2b2891-a67c67-7d8180-3bb12f-ddfd85 [current_usage] => 1 [max_usage] => 2 [current_usage_crypto] => 0 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 145725 [reason] => Usage under limits [method] => ) 1 and can accesss 1

VIDEO: It is clear that the winner of the 2024 Presidential election will not be decided on 11/5 evening, but could be a drawn out period.  This harkens back to 2000 when Gore-Bush decision was not made until Dec 12th.  We look at the market impacts and even what might be priced in

Please click below to view our Macro Minute (duration: 3:54).

As our clients know, we have probably been too overly “wary” in front of the election and we viewed October as an “iffy” month. The S&P 500 declined -1% in October, with YTD gains still an impressive +20%. So far in 2024, the SPY 0.31%  has risen 8 of 10 months, a very strong year by any standard. Equities have waffled in the past few weeks, and deteriorated even further this week. To us, this is not reflective of fundamentals.

• Several non-fundamental headwinds emerged recently, which we believe, are contributing:
  – first, investors realizing 2024 Presidential election not decided on 11/5
  – second, market internals have deteriorated, as flagged by Mark Newton
  – third, FOMC rate decision next week (11/7) and currently “blackout”
• Our survey of clients show that 75% do not believe the outcome of the Presidential election will be decided on the evening of 11/5. And in fact, the plurality see the election decided sometime between mid-Nov to end of year. That is akin to 2000, when the Gore-Bush race was not decided until December 12th and that required the Supreme Court decision
• Intuitively, we can imagine equity markets would be on “hold” until after this election decision is made. As we noted multiple times, the medium term outlook for equities is unlikely materially different between a Democratic or Republican White House, nor Congress. But the near-term issue is risk appetite, given the natural uncertainty that stems from a disputed election outcome.
• The VIX spot and VIX futures markets are telling us that equities are bracing for a somewhat extended period of volatility. Consider:
  – VIX 1M (11/20/24) contract at 20.2
  – VIX 2M (12/20/24) contract at 19.7
  – So the Nov contract shows a highly elevated VIX reading
  – this contract has averaged 15.7 in 2024
• The VIX term structure is inverted and is staying inverted past election day. The “inversion” means the near-term contracts have a higher value than further dated. This implies markets expect larger volatility moves near-term.
• The near-term macro data has been inline mostly. Today’s Sept Core PCE came in at +0.25% MoM, which is inline with consensus. And housing/shelter slowed its contribution to growth to +0.06% from +0.08%. This is somewhat promising as shelter is the largest contributor to rising Core PCE. But investors are less focused on macro recently, and more focused on election dynamics, we believe.
• On Friday, Oct jobs is released and this is likely to be stronger than consensus of +110k. The jobs gains are expected to be slower in Oct due to transitory impacts from hurricanes. Will a stronger jobs report be a bad thing? Because it will push Fed incrementally hawkish? While many believe this, keep in mind Powell is constantly “mentally adjusting lower” the jobs reports. So, a strong jobs report may not sway the Fed as much as one thinks.
• Earnings after the close Thu are mostly good. The standouts are:
  – Amazon AMZN 0.93%  +4% after hours
  – Intel INTC -3.10%  +12% after hours
  – Apple AAPL 0.28%  -1% after hours

BOTTOM LINE: The “iffy period” likely extends a few more weeks

We don’t get the sense that we are in the full “risk-on” environment yet and this is likely getting pushed out into later in November. This is consistent with the technical views shared by Mark Newton.

• Mark believes markets still see possible upside potential for markets near-term, even pushing higher into election day.
• But he is also noting the unattractive risk/reward at the moment.

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Key incoming data November:

• 11/1 8:30 AM ET: Oct Non-Farm Payrolls
• 11/1 9:45 AM ET: Oct F S&P Global Manufacturing PMI
• 11/1 10:00 AM ET: Oct ISM Manufacturing PMI
• 11/4 10:00 AM ET: Sep F Durable Goods Orders
• 11/5: US Presidential Election 2024
• 11/5 8:30 AM ET: Sep Trade Balance
• 11/5 10:00 AM ET: Oct ISM Services PMI
• 11/6 9:45 AM ET: Oct F S&P Global Services PMI
• 11/7 8:30 AM ET: 3Q P Non-Farm Productivity
• 11/7 8:30 AM ET: 3Q P Unit Labor Costs
• 11/7 9:00 AM ET: Sep F Manheim Used vehicle index
• 11/7 2:00 PM ET: Nov FOMC Decision
• 11/8 10:00 AM ET: Nov P U. Mich. Sentiment and Inflation Expectation
• 11/12 6:00 AM ET: Oct Small Business Optimism Survey
• 11/12 11:00 AM ET: Oct NY Fed 1yr Inf Exp
• 11/13 8:30 AM ET: Oct CPI
• 11/14 8:30 AM ET: Oct PPI
• 11/15 8:30 AM ET: Oct Retail Sales Data
• 11/15 8:30 AM ET: Nov Empire Manufacturing Survey
• 11/18 10:00 AM ET: Nov NAHB Housing Market Index
• 11/18 4:00 PM ET: Sep Net TIC Flows
• 11/19 9:00 AM ET: Oct M Manheim Used vehicle index
• 11/21 8:30 AM ET: Nov Philly Fed Business Outlook
• 11/21 10:00 AM ET: Oct Existing Home Sales
• 11/22 9:45 AM ET: Nov P S&P Global Manufacturing PMI
• 11/22 9:45 AM ET: Nov P S&P Global Services PMI
• 11/22 10:00 AM ET: Nov F U. Mich. Sentiment and Inflation Expectation
• 11/25 8:30 AM ET: Oct Chicago Fed Nat Activity Index
• 11/25 10:30 AM ET: Nov Dallas Fed Manuf. Activity Survey
• 11/26 9:00 AM ET: Sep S&P CoreLogic CS home price
• 11/26 10:00 AM ET: Nov Conference Board Consumer Confidence
• 11/26 10:00 AM ET: Oct New Home Sales
• 11/26 2:00 PM ET: Nov FOMC Meeting Minutes
• 11/27 8:30 AM ET: Oct PCE Deflator
• 11/27 8:30 AM ET: 3Q S 2024 GDP
• 11/27 10:00 AM ET: Oct P Durable Goods Orders

Key incoming data October:

• 10/1 9:45 AM ET: Sep F S&P Global Manufacturing PMI Tame
• 10/1 10:00 AM ET: Sep ISM Manufacturing PMI Tame
• 10/1 10:00 AM ET: Aug JOLTS Job Openings Tame
• 10/3 9:45 AM ET: Sep F S&P Global Services PMI Tame
• 10/3 10:00 AM ET: Sep ISM Services PMI Mixed
• 10/3 10:00 AM ET: Aug F Durable Goods Orders Tame
• 10/4 8:30 AM ET: Sep Non-Farm Payrolls Hot
• 10/7 9:00 AM ET: Aug F Manheim Used Vehicle Index Tame
• 10/8 6:00 AM ET: Sep Small Business Optimism Survey Tame
• 10/8 8:30 AM ET: Aug Trade Balance Tame
• 10/9 2:00 PM ET: Sep 18 FOMC Meeting Minutes Dovish
• 10/10 8:30 AM ET: Sep CPI Hot
• 10/11 8:30 AM ET: Sep PPI Tame
• 10/11 10:00 AM ET: Oct P U. Mich. Sentiment and Inflation Expectation Tame
• 10/15 8:30 AM ET: Oct Empire Manufacturing Survey Tame
• 10/15 11:00 AM ET: Sep NY Fed 1yr Inf Exp Tame
• 10/17 8:30 AM ET: Sep Retail Sales Data Tame
• 10/17 8:30 AM ET: Oct Philly Fed Business Outlook Tame
• 10/17 9:00 AM ET: Sep M Manheim Used Vehicle Index Tame
• 10/17 10:00 AM ET: Oct NAHB Housing Market Index Tame
• 10/17 4:00 PM ET: Aug Net TIC Flows Tame
• 10/23 10:00 AM ET: Sep Existing Home Sales Tame
• 10/23 2:00 PM ET: Oct Fed Releases Beige Book Dovish
• 10/24 8:30 AM ET: Sep Chicago Fed Nat Activity Index Tame
• 10/24 9:45 AM ET: Oct P S&P Global Manufacturing PMI Tame
• 10/24 9:45 AM ET: Oct P S&P Global Services PMI Tame
• 10/24 10:00 AM ET: Sep New Home Sales Tame
• 10/25 10:00 AM ET: Oct F U. Mich. Sentiment and Inflation Expectation Tame
• 10/25 10:00 AM ET: Aug F Durable Goods Orders Tame
• 10/28 10:30 AM ET: Oct Dallas Fed Manuf. Activity Survey Tame
• 10/29 9:00 AM ET: Aug S&P CoreLogic CS home price Tame
• 10/29 10:00 AM ET: Oct Conference Board Consumer Confidence Tame
• 10/29 10:00 AM ET: Sep JOLTS Job Openings Tame
• 10/30 8:30 AM ET: 3Q A 2024 GDP Tame
• 10/30 10:00 AM ET: 3Q24 Treasury Quarterly Refunding Press Conference Tame
• 10/31 8:30 AM ET: Sep PCE Deflator Tame
• 10/31 8:30 AM ET: 3Q Employment Cost Index Tame

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023: