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Post-Election Positioning


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I'm wondering how folks are thinking about positioning in the post-Election period......lets call it Nov 3rd to End of Nov?

 

This period will be volatile for sure with a pocket of uncertainty post Nov 3rd around what candidate won the White House and what party will control the Senate....undoubtedly Trump will issue some incendiary tweets (and I hope that is all)...........with all this happening against the backdrop of rising COVID cases/hospitalizations pointing the US inevitably into lockdown V2.0.

 

On the far side of this however is a possible emergency use authorization request from Pfizer for their vaccine at the end of Nov. which may, depending on the clinical data, provide a clear roadmap for the Western World to get out of this by end of H1 2021.

 

The point of maximum uncertainty and greatest opportunity I feel is likely in this two to three week period post Nov 3rd.

 

Interested in thoughts around how folks are positioning themselves for this period and where.

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I agree with the timeline and have been using various Nov 20 options.

 

Fundamentally, the market was IMO somewhat exhausted in 2016, barring policy changes. Tax cuts and deregulation, etc. Now we've done that and the only thing left to add juice is stimulus. Otherwise, that fundamentals arent very attractive and then skew of positive and negatives(IE margin expansion, multiple expansion, profit growth, regulation, tax rates, etc) are not favorable.

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changegonnacome & Greg,

 

This is US macro talk, right? [ : - ) ] [Things may vary from country to country, and per company.]

 

IDK...maybe US macro, maybe macro US+elsewhere. Whatever makes money right?

 

To add more color, I think select areas of the market will do well given the environment, such as stuff in the EV related universe, marijuana, casino, residential RE, but as always you've got to be selective. States will get big bailouts but still others need to raise funds via new revenue...the by product of that IMO will be felt in the above sectors.

 

 

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changegonnacome & Greg,

 

This is US macro talk, right? [ : - ) ] [Things may vary from country to country, and per company.]

 

IDK...maybe US macro, maybe macro US+elsewhere. Whatever makes money right?

 

To add more color, I think select areas of the market will do well given the environment, such as stuff in the EV related universe, marijuana, casino, residential RE, but as always you've got to be selective. States will get big bailouts but still others need to raise funds via new revenue...the by product of that IMO will be felt in the above sectors.

 

As someone who has private RE holdings in New York City, I am starting to thinking that a Biden victory will probably be better for bailout for NYC and if doing away with the $10,000 deduction limit maybe better for the local RE market.

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changegonnacome & Greg,

 

This is US macro talk, right? [ : - ) ] [Things may vary from country to country, and per company.]

 

IDK...maybe US macro, maybe macro US+elsewhere. Whatever makes money right?

 

To add more color, I think select areas of the market will do well given the environment, such as stuff in the EV related universe, marijuana, casino, residential RE, but as always you've got to be selective. States will get big bailouts but still others need to raise funds via new revenue...the by product of that IMO will be felt in the above sectors.

 

As someone who has private RE holdings in New York City, I am starting to thinking that a Biden victory will probably be better for bailout for NYC and if doing away with the $10,000 deduction limit maybe better for the local RE market.

 

 

SHHHHHHHH! You and I both brother.

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Regarding the election i think they key will be if we end up with a split congress or not.

 

If Democrats win Presidency and House but do not win Senate then the US economy is in deep shit. There will be no stimulus as Republicans will revert to being normal Republicans (fiscal hawks). Gridlock will not be good in the middle of a pandemic.

 

If Democrats win Presidency, Senate and House then we likely will see massive spending which will be good for the economy and markets short term.

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Regarding the election i think they key will be if we end up with a split congress or not.

 

If Democrats win Presidency and House but do not win Senate then the US economy is in deep shit. There will be no stimulus as Republicans will revert to being normal Republicans (fiscal hawks). Gridlock will not be good in the middle of a pandemic.

 

If Democrats win Presidency, Senate and House then we likely will see massive spending which will be good for the economy and markets short term.

 

But also tax increase

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Seems like Biden will win, so:

 

Higher corp taxes -> lower earnings -> lower stock prices.

Higher income taxes -> less spending -> less earnings -> lower stock prices.

More stimulus -> higher earnings -> higher stock prices.

More stimulus -> more $ printed -> more inflation? -> higher interest rate? -> lower stock prices?

More stimulus -> more $ printed -> less inflation? -> lower interest rates? -> higher stock prices?

More regulation -> lower earnings -> lower stock prices.

 

Might be very beneficial for O&G, higher regulation will limit investment and future output, prices can finally rise.

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I don't think Lockdown 2.0 has been priced in and could easily turn a V shaped recovery into a W or even a Nike swoosh. A power vacuum could hinder an effective response and make things a lot worse.

 

And if a market can fall 30% in little more than a month and rise 50% in only a few months then any market moves will probably be similarly exaggerated.

 

On the other hand the set up seems a little too obvious. But perhaps bulls do still have rose tinted spectacles on and got overconfident there would be a clearcut Biden victory and a vaccine rollout would happen before cases rose to the point where lockdowns were considered.

 

Probably this is all quite bullish for Big Tech especially if cyclical sectors sell off on virus/lack of stimulus fears. Although we might see in Q3 earnings that they are not completely decoupled from the wider economy.

 

Probably quite bearish for financials as credit loss provisions made earlier in the year may now prove completely inadequate.

 

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Yes I do wonder what happens in the post election, pre inauguration leadership vacuum when we are in the cold season and cases are spiking. Some decisions may be required. At a minimum some fiscal package, at max a lockdown.

 

Most of the decisions regarding health and COVID-19 are made by the individual states, not the government in Washington. Sure the federal government can and should help but one would think they could do two month or so without.

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Any updated thoughts on this? Markets have been quite buoyant going into the election but doesn't look as there will be a clear outcome for weeks which could result in a lot of volatility.

 

I think the close election is the result the market is looking for. It doesn’t really matter that much which way it goes. Close is good enough. That said, I do expect some mood swings from Mr Market, but that is nothing new.

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  Agree the likely outcome seems quite favourable. Perhaps now the focus will turn to the rising case numbers which in the US crossed 100K yesterday. I don't think there has been any talk of lockdowns yet and in the UK at least the sense is that we have entered into lockdown prematurely. But rising uncertainty re the health situation should definitely start to worry markets regardless of how favourable the election outcome is viewed.

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