The markets today, Wednesday, viewed several hours before the opening, appear set to be one of the most volatile single days in recent history, as analysts and investors attempt to sort out the aftermath of yesterday’s federal election.
At time of writing, major European and North American stock indicators are very mixed between red and green, reflecting the lack of resolution.
In these columns I usually suggest the possibility that the indicators can change before and after the 9:30 a.m. EST market opening and that possibility is very real today especially since, at time of writing, the vote counting has not completed. In fact, the indicators changed even while I was assembling this column.
Last night at about 2:00 a.m. EST, President Trump claimed victory and insisted that vote counting – as yet incomplete – had to stop. President Trump also declared his intention to go to the Supreme Court.
The implications for the stock market and for investors can be considered in two columns. The vote-counting can be completed within several days and both the market and investors would see a clearer path on that score. However, a Supreme Court battle, even if expedited, would take weeks for a decision.
The so-called ‘blue wave’ did not materialize and the final results – whenever known - will show a much closer fight than anticipated by some analysts.
Yesterday, some observers had anticipated a clear victory for Joe Biden, to be followed by quick action on a relief package that would bolster the economy, drive consumer spending, lending some stability to the markets and provide some insurance as virus cases continue spiking
A wait for the final vote count would probably delay development of the recovery package but that delay could be tolerable. Going to the Supreme Court could freeze moves to the stimulus package and the benefits expected for a longer period
Moreover, as the old saying goes, ‘markets hate uncertainty.’ Investors are already nervous and a long delay before a final resolution will make them more nervous, adding to the existing level of volatility.
Depending on how long it takes to achieve a final resolution, the difficulties – of which there are several – for individuals - -will include preparing for year end investment decisions, assessing asset allocation strategies.
Still, it can be argued that President Trump and former Vice President and challenger Joe Biden have several things in common. At the top of the list is the need to cope as quickly and as effectively as possible with the pandemic and its very costly impact on individuals and companies. A delay for a Supreme Court hearing could set that back, according to Chris Beauchamp, Chief Market Analyst at London stock firm IG Group. “The bigger problem now is that a new fiscal stimulus is now very unlikely in the foreseeable future, given the potential for extended legal action in coming weeks before a winner emerges,” he says. “And even then we can look forward with trepidation to the president (whoever that is) having to battle lawmakers to get a stimulus bill through.”
For another view of the damage caused by the pandemic, the travel sector provides a case in point this week. Expedia Inc. reports its third quarter results today. Not surprisingly, analysts expect drops in earnings and revenue. Much the same is expected for Hilton Worldwide Holdings Inc.’s release of third quarter results, also expected today. Starwood Property Trust Inc. reports third quarter results on Thursday and Marriott International Inc. reports third quarter results on Friday. In all these cases, revenue drops due to the COVID 19 crisis can be expected but also in all four cases, investors will want clear guidance on the 2021 outlook. Taken together these results will provide a near-term composite of investments in the travel sector
However, for a very different view of the fallout from the pandemic, computer dating service Match Group Inc. whose brands include the controversial Tinder dating app, will likely post increased revenue today, due to increases in usage during the lockdowns and stay-at-home periods.