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Market Update: Wed, Oct 21, 2020 | LPL Financial Research Thumbnail

Market Update: Wed, Oct 21, 2020 | LPL Financial Research

Markets opened slightly lower. US equities are flat this morning following Tuesday’s solid session. Optimism over stimulus talk progress prevails, even though Senate approval may be a big hurdle to completing a deal. Improving earnings results so far in this reporting season have been viewed as positive. Most Asian equity markets finished higher, with Hong Kong the standout; most European markets are firmly lower through midday trading. 

Stocks and reelected presidents. Stocks historically have done much better the year after a president was reelected than when there was new leadership in Washington, DC. Since 1950, in the year following a presidential reelection, the S&P 500 Index was up 9.6% on average versus only half of that if a new president took office—4.8%. We take a closer look at this interesting phenomena later today on the LPL Research blog.

Brexit negotiations stalled. The on/off talks regarding the United Kingdom’s (UK) withdrawal from the European Union (EU) appear to be stuck after a call on Tuesday between the negotiators failed to yield any progress. Neither side appears willing to “blink first” over the contentious issues of domestic state subsidy control and access to British fishing waters. Only a month remains for a deal realistically to be reached that could be passed into law before year-end. We still anticipate that some agreement will be reached, but the risk of an accidental “No Deal” Brexit rises the longer the political brinksmanship continues.

Election 2020 update. Early voting continues to pick up steam, where several states have already surpassed or are close to 50% of the 2016 total, with Texas, Vermont, and New Jersey leading the way (data from the US Elections Project). With the final presidential debate scheduled for Thursday, nearly 38 million Americans have already had their votes tallied.

Technical update. Equities sold off in the final two hours of Tuesday’s trade but still finished with solid gains across the board. The S&P 500 gained 0.5%, closing at 3443 and remaining above short-term support at 3425. Advancers on the NYSE outnumbered decliners by more than 2:1.

COVID-19 news. Case growth continued its steady rise toward 60,000 a day on Tuesday, increasing concerns that the United States may follow Europe’s path of spread. The seven-day average of new US cases rose 16% over the prior week, while hospitalizations continued to gradually trend higher (source: COVID Tracking Project). The death toll has started to creep up this week and bears watching. Germany, Greece, and the Netherlands hit daily case records overnight, while containment efforts seem to be helping in India, Israel, and Spain.

 

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