One trading day to go. For todayâs edition, we reached out to six of Wall Streetâs top minds to find out what theyâre monitoring as the Trump-Harris race concludes.
For most of October, Trumpâs lead in prediction markets coincided with strong stock and crypto prices, as well as rising bond yields.
The S&P 500, for one, is enjoying its best election-year in decades, though the rally cooled to end the month. At the same time, the word âelectionâ came up on 100 earnings calls over the last two weeks, according to FactSet â the highest on record.
âGoing into the election, market sentiment has suffered a âpullbackâ from what could be described as extreme bullishness,â Katie Stockton, founder and managing partner of Fairlead Strategies, told me.
The close race, Stockton added, has injected uncertainty to markets, which have seen elevated volatility lately. Forecasters expect that to continue in the week ahead, especially as some state officials have warned that votes could take several days to tally.Â
âWe think investors may initially welcome a decisive outcome to the election, regardless of whoâs the winner,â she said. âBut we would caution against chasing a rally given sentiment indicators have already flashed warning signals.â
âAn unclear result â and the political fallout it could trigger â is the ultimate tail risk haunting Wall Street right now,â Mark Malek, CIO at Siebert, told me. âMarkets can price in tariffs, tax changes, and deficits, but uncertainty over the election outcome is a wild card that will surely bring short-term volatility.â
Mixed economic expectations
Broadly, Harris favors higher spending fueled by higher taxes, whereas Trump favors lower taxes fueled by higher tariffs.Â
In the scenario of a Trump victory, Gene Goldman, CIO at Cetera Investment Management, said tariffs and immigration limits could lead to lower US growth estimates for 2025 and higher inflation expectations.
âThe latter likely reduces the number of Fed rate cuts in 2025,â Goldman said.Â
Meanwhile, James Fishback, co-founder and chief investment officer at Azoria, told me that he believes the tax reforms of a Trump administration could boost American investment.
He said the former president would fuel innovation by dismantling some of the existing bureaucracy.   Â
âItâs about the economy, innovation, and productivity â the most important inputs in any asset price,â Fishback said. âA Harris win isnât catastrophic, but it is a missed opportunity to tackle structural issues stifling US growth.â
âHigher deficits typically lead to higher long-term Treasury yields,â Malek said, âprimarily because the increased supply of bond debt to finance the deficit pushes yields upward.â
What it means for stocks
Market-watchers generally consider political gridlock to be the most bullish scenario for equities.
That said, the oldest quip in markets is worth remembering here: When you zoom out, stocks usually go up.Â
To that point, Callie Cox, chief market strategist at Ritholtz Wealth Management, pointed out that market crashes, bull-runs, and recessions have occurred under both political parties.
In fact, since 1900 every president except George HW Bush has presided over a bear market.
âRight now, in the midst of deafening political noise, the best thing you can do is focus on your [investment] goals, not on the headlines,â she said.
Jamie Cox, managing partner at Harris Financial Group, told me he ultimately isnât worried about the electionâs impact on markets.Â
âThe larger positive market forces remain present, intact, and far more important [than the election],â Cox said. âA growing economy, a more favorable interest rate trajectory, and an innovation wave thatâs like an industrial revolution with AI.âÂ
Comments or feedback? Reply directly to this email or let me know on X @philrosenn.
Elsewhere:
đWarren Buffett keeps selling Apple. For the fourth quarter in a row, Berkshire Hathaway downsized its stake in the iPhone maker, according to company filings Saturday. At the end of the third quarter, Berkshireâs cash pile reached $325.2 billion, an all-time high for the conglomerate. (CNBC)
đ October jobs looked sparse. The US said it added 12,000 jobs in the month, well below expectations for 100,000, though some analysts cautioned that storms and strikes distorted the data. Keep in mind, the majority of the monthly labor market reports over the last two years has been revised lower, after the fact. (Yahoo Finance)
đŚÂ The Fed likely will cut 25 basis points. Policymakers look all but certain for a modest rate cut on Thursday, two days after the presidential election. The softening labor market and recent cool inflation data seems to point to a moderate pace of cuts. Markets are betting that the Fed lowers rates to the 3.5-3.75% range by September 2025. (Reuters)
Rapid-fire:
Earnings this week include tech names Palantir, Super Micro Computer, Qualcomm, and Arm
Nvidia will join the Dow Jones Industrial Average, replacing Intel (The Street)
Nearly $1 billion has been spent on political ads in just the last week (CNBC)
Berkshire Hathawayâs profits dipped 6% in the third quarter to $10.1 billion (Barronâs)
The incumbent White House has historically won if stocks are rallying into the election (Business Insider)
Crude prices are wavering as OPEC+ pushes back its plan to ramp up oil production in December (Bloomberg)
Eight states are back above pre-pandemic housing inventory levels (ResiClub)
Last thing:
Markets & Mayhem @Mayhem4Markets
Fund manager cash levels have dropped to 3.9%, which has triggered a sell signal for stocks according to BofA.