Things you need to know.

It is that time of year when the NYC charitable fundraisers kick off…As you know, The Headstrong Project is dear to me. I am chairman of the ‘advisory board’ that seeks to raise awareness of the work we do on behalf of our veterans that suffer from PTS.    (getheadstrong.org). Our NYC Gala takes place on Thursday, November 7th at Cipriani’s Wall St. General Jim Mattis is our keynote and I expect that we will raise ~$4 mil that evening.  If you are considering supporting a charity this year – please consider our Veterans and The Headstrong Project.  Give me a call if you’d like to learn more. 

https://support.theheadstrongproject.org/give/551757/#!/donation/checkout

–         Stocks churn ahead of today’s election.

–         Both candidates make last ditch efforts to sway voters.

–         Bonds rise (after getting beaten up over the last 6 weeks).

–         Oil – up sharply, gold churns.

–         The FED is set to announce a 25-bps rate cut on Thursday – Nicky confirmed that.

–         Try the Yummy Brisket

Stocks struggled to gain momentum on Monday while bonds rose amid heightened anxiety over the tight U.S. presidential race and the upcoming FOMC rate decision that is happening on Thursday.  Polls are showing a closer contest between Trump  and Harris while the betting markets have gone from definitely Trump to ‘I’m not sure any more’….all this as the clock ticks, Investors, traders and even the algo’s opted for caution, fearing potential election disputes could and will prolong the vote count – recall that the 7 swing states have already prepared us for ‘days of waiting’ only adding to market volatility. Bond prices rose, causing yields to decline, the dollar dropped, Bitcoin fell, and DJT (the stock) continues to be erratic… all while the VIX was all over the place…. causing stocks to remain under pressure.

At the end of the day – the Dow gave up 260 pts, the S&Ps lost 16 pts, the Nasdaq lost 60 pts, the Russell added 9 pts, the Transports lost 64 pts while the Equal Weighted S&P added 7 pts.   

The contra trades all ended the day higher…the DOG + 0.6%, the SH + 0.2%, the PSQ + 0.3%, while the SPXS added 0.8%. 

Of the 11 S&P sectors – Real Estate was up 1.1%, Energy +1.75%, Basic Materials + 0.45%, and Consumer Staples added 0.3%.  The other 8 sectors all ended lower…. Utilities -1.2%, Financials -0.8%, Healthcare -0.7%, Consumer Discretionary and Communications down 0.3%, Industrials & Tech down 0.1%.

The value trade lost 0.2% while the growth trade gave up 0.3%.  Metals & Miners gave up 0.5%, Semi’s lost 0.6%, Aerospace & Defense gained 0.3%.

Now besides the election – we have the FOMC meeting out on Thursday…. what will JJ do?  Can he cut?  Will he cut?  Does he need to cut?  My guts says that he shouldn’t cut, and we don’t need a cut, but the markets are expecting a 25-bps cut.  This morning it is clear…. Nicky T – WSJ fame – has a front-page article (actually page 2) that runs with this headline.

“FED on Track for Quarter Point Rate Cut”

And there you have it….Nicky has confirmed the message that the FED wants to deliver on Thursday (Remember – they are in black out mode – unable to speak directly to the markets – so they do it thru Nicky) and Nicky notes that inflation is making ‘continued progress toward their 2% goal.’  So, there should be no more speculation about what is going to happen….  The question now is – What is the terminal rate?  Is it 4.5%, 4.25%. No matter what it is – we are now solidly in a new monetary policy phase – if this keeps up, then we can expect rates to be ‘less restrictive’ over time or at least that is what they want us to believe….I’m just not sure how they can say that when both sides have promised to spend more money and inflation is expected (confirmed by the CBO and our friends at Goldman)to raise its ugly head again…. The excitement will be what JJ says about the next meeting – Is he leaving the door open?  Will he comment on Friday’s disastrous NFP report?  And then we still have 40% of the S&P that has yet to report…. So, it’s complicated….

In the end, they will point to a cooling labor market as the reason to push rates lower, I would argue that the labor market is not cooling as fast as they suggest, but I am not an FOMC member.  On the economic front – last week we learned that GDP grew at a 2.8% clip – a bit below the expectation but still healthy enough – considering the ‘weakened’ consumer continues to spend, defying expectations of a slowdown. Yesterday – Factory orders and Durable Goods order reflected weakness while today’s Services PMI’s are expected to remain in expansionary territory. So, it is a mixed bag, but that also might suggest that rates at current levels are not restrictive at all – thus my call to do nothing.

Bond prices rose, the TLT and TLH up 1.5% and 1.3% respectively….and this sent yields a bit lower….This morning – the 2 yr. is yielding 4.17% while the 10 yr. is yielding 4.30% – recall that these yields have done nothing but go up ever since JJ cut rates by 50 bps 2 months ago…Now, does that suggest confusion in the bond market or does it suggest that the FED is doing the wrong thing? Well, we are about to find out.

Oil – continues to rally – yesterday it rose by 3.2% and this morning it is up another 0.3% all on the idea that the tensions are rising in across the mid-east – where Iran is expected to attack Israel in the weeks ahead all while the Saudi’s have declined to increase production. This morning – oil is trading at $71.75 – smack in the middle of trendline support ($70.10) and trendline resistance ($73).  

Now this week – China’s Standing Committee of the People’s Congress is in session and are expected to approve additional stimulus to help boost their slowing economy and many will say that that will help create demand for oil. In my mind – the next move will be driven by what happens in the mid-east.

Gold continues to trade around the $2750 level…unsure of what’s next….it remains in the $2700/$2800 trading range and won’t move beyond that until after the election and the FED statement.

Eco data today includes ISM services PMI of 53.8 (expansionary), and S&P Services PMI of 55.3 (expansionary). And then Thursday brings us the FOMC announcement….

US futures are up…. Dow futures +65, the S&P’s up 13, the Nasdaq +70 while the Russell is ahead by 12.  It is election day…. And as voting begins in a very tight U.S. presidential race between Trump and Harris, global traders remain cautious amid potential election uncertainties, as polls indicate a close result could lead to a prolonged vote count, increasing market volatility and investor angst.

PLTR reported ‘record profits’ citing ‘unwavering’ demand for AI…..the stock is already up 140% ytd and after their report – the stock is up another 12% ($46.80) in the pre-mkt….Revenues of $725 million easily beating the estimates of $701 million…..and their outlook is strong – no one should be surprised – nearly EVERY analyst/strategist has been singing about PLTR for months now….……Wedbush analyst and friend Dan Ives has nailed this….and this morning he is upping his price target to $57…..up another 20+% from here.

Boeing union members voted on the latest contract giving them a 38% pay raise over 4 yrs. along with signing bonuses and performance bonuses etc. although it did not include restoration of the company pension plan (not sure how that works), but it passed bringing the crippling strike to an end. This morning the stock is quoted 1.3% ($158) in the pre-mkt…but remember – the stock is down 40% ytd…so there is plenty of room to play ‘catch up’ IF you believe in the story…..Remember – it is a duopoly – BA and Airbus…and you can believe that the US gov’t is not going to let BA go down the drain (unless of course Elon joins in the fun)…..much like they didn’t let GM go down the drain.

Remember – no matter what happens today at 1600 Pennsylvania Ave – what might be even more important is what happens in Congress…. if it remains divided – then we have gridlock – something the market likes…but if we get a sweep either way – that is surely going to mean a new round of uncontrolled spending on either side – as both sides have promised to ramp it up…..The only thing will be that the Republicans will accompany that with less regulation and less taxation, while the Dems will add more regulation and more taxation….so, pick your poison….I guess the only thing we have to worry about is when will we know? 

European markets are a bit higher…. up between 0.1% and 0.2% reflecting ongoing uncertainty…. over the US elections – leaving many traders to remain reluctant to commit any capital due to the ‘stark differences’ in policies.   Remember – politics do not price stocks in the long term, but it can and does create short term volatility that creates long term opportunity.

The S&P closed at 5712 – down 16 pts.  Last week – we traded right down to the short term trendline at 5700 and held – yesterday we traded back down and failed to hold – trading as low as 5696 – before settling higher.  ….- this morning futures are suggesting that we trade a bit higher but the day will become more erratic as we move thru it and speculation begins to build about how this will shape up.  I said that I would not be surprised to see us test it 2 more times – we tested yesterday…so now we should test it once more….….to see if it holds. 

If it doesn’t – that is no reason to panic…..remember – this could be a very volatile week – investors should not be drawn into making a rash decision….markets can be irrational in the short term…..depending on the rhetoric….so talk to your advisor if you are concerned about your portfolio…

Remember – Trendline supports are at 5700, 5592 and 5359…. a move down to the long term trendline support (5359) is only a 6.5% move from here and well within what is considered ‘normal’…. We’d have to trade down to 5295 to suffer a 10% correction off the October high of 5878 – so for me, that is the key. 

This morning the VIX is down 0.5% at 21.88 – and that suggests less fear….The level to watch is 23.45…..a move up and thru that would see the VIX surge (rising fear) and stocks to fall….barring that – we may just see more churn as we move thru the day.   

My guess is that once the election is over and the winners (WH, Senate and House) are determined, then investors can focus back on what the economy would be expected to do under either administration.

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

Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment.  The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.

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.

While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.

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.

Delicious Brisket

For this you need: The brisket, onion powder, garlic powder, paprika, s&p, olive oil, brown sugar, 2 lg onions, carrots, celery, small red potatoes, balsamic vinegar, red wine and 2 heads of garlic.

Preheat your oven to 325 degrees.

Start by seasoning the brisket with the dried seasoning and brown sugar.  Add some olive oil and massage the whole brisket on both sides.  Let it rest for 30 mins.

Cut up the veggies and set aside.

Now in a large frying pan- add some olive oil – get it nice and hot and then sear the brisket on both sides – until you have a bit of a crust.  Then transfer it to a large roasting pan.

In the same frying pan – add in the onions, – cook until softened – now add in a splash of balsamic vinegar and then let it cook until it is all evaporated.  Next add in about ½ bottle of red wine…. bring it to a boil and then turn to med and let it reduce for 10 mins.

While this is happening – place the carrots, celery and potatoes all around the brisket…Cut off the tops of the garlic bulbs and place those in the roasting pan as well.  Soak (don’t overdo it) the garlic bulbs with some olive oil.  Pour the onions and wine over the whole thing – cover tightly and place in the oven and cook for 3 hours….

Now remove the cover – turn the heat up to 400 and cook for 15 more mins.

Remove and let rest for 5 mins…and then place it on a serving platter and let your guests tear it apart… (it shreds so easily with two forks).

Yum….

Buon Appetito