Things you need to know.
– Trump wins a second term and becomes the both the 45th and 47th President.
– The Blue wall turned Red.
– In the end – “it’s the economy, stupid”!
– Futures on FIRE, Bond yields surge
– OIL and Gold down, VIX collapses.
– Try the Shells
It is morning in America! The country has spoken and spoken quite definitively…. There is nothing to misunderstand…. The headlines say it all. The message was clear – We were on the wrong track. To use a famous Democratic tag line from 1992 – Clinton Vs. Bush: “It’s the Economy, Stupid.”
and now it is what it is…. In the end – it was well past midnight before we knew that he flipped the blue wall, they flipped the Senate and may still control the house (that is not clear yet) and it appears that he won both the Electoral College and the Popular Vote. It will be hard for MSNBC to dispute – but let’s see how they position it…. It is time to put all of the rhetoric behind us, it is time to heal…so let’s go!
Markets across the Eurozone are screaming higher, futures in America are screaming higher…. At 5:30 am – Dow futures are up 1240 pts or 3%, the S&P’s up 140 or 2.4%, Nasdaq up 375 or 2% and the Russell is ahead by 145 pts or nearly 6.5%! Today is a new day – what happened yesterday in the markets is irrelevant now…but let’s just take a look – stocks did advance yesterday – Tech and the broader market advanced largely boosted by Palantir’s 23% surge following strong earnings and forward guidance that lit the fuse on anything tech…. and that caused more money to move into all areas of the sector……Semi’s up 1.2%, Disruptive Tech up 3.25%, Cybersecurity +1.4%, Expanded Tech +1.75% and of course NVDA – sending it up 2.5% to $139.91.
This morning – the bond yields are surging…. the 10 yr. up 20 bps now yielding 4.46%, the 2 yr. is up 10 bps at 4.28%. So what’s happening? Money is moving out of bonds (investors selling bonds.) and into the stocks as the celebration begins………. Lower bond prices equals higher yields…. the question now is, at what point will higher yields affect equities…? Now, do not discount the idea that the bond market is also telling us to expect higher inflation – that was happening no matter WHO moved into the WH…so be careful how you position this…. Both candidates had promised spending more money, so both would reignite inflation….
Now – today begins the FED’s FOMC meeting with the announcement tomorrow at 2 pm….leaving many of us wondering what JJ will say….I mean last Friday – we got a weak NFP report, yet yesterday we got 2 much stronger Services PMI reports…and remember – we are a 75% SERVICES economy, so these reports should not be dismissed…..Will the election – change the FED’s narrative? We are about to find out…. Mkts are expecting a 25-bps cut – so let’s see what JJ says tomorrow about how the FED can assist….and that might mean that he holds rates steady….
The VIX plunged by 7% to end the day at 20.49, suggesting little fear – and this morning – the VIX is down another 24%! – trading at 15.60 – levels not seen since the late summer/early fall of 2024….suggesting that there is no fear at the moment…..Remember – markets like clarity – they function better when it knows what’s going on – good or bad, it just wants clarity……and last night it got it.
Yesterday we saw Consumer Discretionary gain 1.8%, Industrials + 1.7%, Utilities +1.5%, Tech + 1.4%, Real Estate +1.3%, Communications +1.1%, Financials +0.9%, Healthcare + 0.75%, Consumer Staples + 0.6%, Energy +0.6%, while Basic Materials added 0.15%.
Homebuilders surged by 2.4%, Retail +1.5%, Airlines up 2.2%, The value Trade – SPYV +1%, the Growth trade – SPYG + 1.4%, Emerging Markets – EEM celebrated rising by 1.4%. For those of you unfamiliar with the EEM – This ETF give you exposure to ‘emerging markets’…. think 25% China, 19% Taiwan, 18.5% India, 10% South Korea, 5% Brazil, 3.8% Saudi Arabia, 3% South Africa, 1.8% Mexico, 1.6% Indonesia, and 1.5% Thailand. – so, IF you are looking for exposure to that part of the world (Emerging Markets) this is a good way to do it……and by the way – the EEM is up 12.5% ytd….so, not so shabby.
Further down the line – Metals & Miners added 1.8%, Semi’s + 1.2%, Aerospace and Defense + 1.3%, Oil & Gas Exploration + 0.9%, Big Pharma + 0.8%, etc.
In the end – long term investors and everyone else just wants this to be over…..so they can refocus on what really matters….Earnings, margins, profits, guidance, ideas, entrepreneurship….and the list goes on…..And if you stayed the course, if you stayed focused you are happy this morning…as futures suggest it will be a great day. Which is why I keep saying – do not react to the noise, do not make emotional decisions…. – build the portfolio and then run with it…. Give me a call to discuss.
Oil – is under a bit of pressure…..API reports that US crude stockpiles rose by 3.1 million barrels last week, and Saudi Aramco cuts prices to Asia all while another Hurricane (Rafael) builds up in the gulf of Mexico…..This morning oil is down 1.25% at $71.10 as the dollar index surges (see more below)……..overnight it tested trendline support and held….leaving it in the $70.05/$72.95 trading range. A failure to hold support could see oil test the October lows of $67…. but remember – that is NOT what the Saudi’s want….so keep your eyes open to see what they do next.
In addition – do not discount the Trump effect…. he has promised to open the spigots and raise oil production to keep us independent and a swing producer…and that means prices should go lower over time…. Lower energy prices will help keep inflation in check…Let’s see.
Gold is down $25 at $2722 – as the news of a Trump win sweeps across the markets…. the dollar index surges by 1.7% to 105.16…and that is putting pressure commodities…. recall the inverse relationship between the dollar and commodities. Higher dollar = lower commodities, lower dollar = higher commodities. For now – gold remains in the $2700/$2800 trading range. If the dollar keeps rising – we could see gold test trendline support at $2657….
Mortgage apps due out at 7 am…but no one cares about that today…. We are also going to get about a dozen earnings reports…. none of which will be a directional driver for the markets today…
The S&P closed at 5782 – up 70 pts and this if futures are any indication of what is going to happen next – we can expect the S&P to open 130 pts higher…. taking us into yet another new century….5900! Recall – most estimates are calling for S&P 6000/6200 by year end…. if the excitement continues – we should hit that by end of week.
Successful investing is a marathon not a sprint. Click on the link to send me a message – I’m happy to discuss.
https://slatestone.com/contact-us/
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
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Kenny Polcari is the Chief Market Strategist for SlateStone Wealth. Neither Kenny nor the partners of SlateStone Wealth are compensated in any manner by the issuers of any securities mentioned in the publication.
Medium Shells w/ Sweet Sausage, Pancetta, and Cannelloni Beans
This is a great dish for a cold night… Light the fire, curl up on the couch……
For this you need: 2 cans of cannelloni beans, garlic, thick-cut pancetta, cut into small cubes, sweet Italian sausage, removed from casing, large sliced onion, olive oil, vegetable broth (I like to use chicken broth), water, s&p, finely chopped parsley, fresh grated Parmegiana, and a box of medium shells.
In a saucepan over med-hi heat – add some olive oil and the sliced garlic – sauté for 3 or 4 mins… now add the sliced onions and sauté until soft and translucent – careful not to burn the onion… When ready…add in the pancetta and sausage and allow to brown up nicely. Using your wooden spoon – break up the sausage as it cooks.
Now add in the 2 cans of Cannelloni beans – juice and all and mix, allowing the beans to marry the other ingredients. Next add the broth and the water at a 2:1 ratio… (2 cups broth, 1 cup water or 4 cups broth, 2 cup water… see the pattern?). Let this simmer on the stove for 15 min… stirring occasionally. Now bring it to a boil (adding more water if you need to, remembering that the pasta grows and sucks up the liquid) – toss in the shells – you don’t need a whole pound here… the pasta grows and sucks up the broth – so maybe like a half pound – depending on how much you are making and cook until al dente – maybe 8 mins or so – adjust for taste and serve in warmed bowls – adorn with the parsley and if you like a drizzle of olive oil. Have plenty of fresh grated parmegiana cheese on the table for your guests.
Buon Appetito
