Good Evening Folks
Well here we are. Arguably one of the most watched elections in recent history, and with record voter turnout. Let’s talk about what has happened and what the markets have been doing.
First, the Dow Jones “overnight futures markets” the night prior to the election (November 2) traded up, ranging from 150 to 200 points. This continued into the regular stock market trading day of November 3, with the Dow Jones reaching 600 points to the positive during the morning. This is a welcome change from the prior week, as it signals the week starting on positive footing. Please see below S&P 500 chart of the recent roller coaster we have been on:
Tuesday’s action witnessed the Dow having the best trading day since July 14. This action follows Monday November 2, which was also a strong up day. On both days, volume was above average, indicating accumulation, or buying of equities by institutional investors. Please see below chart of the SPY Exchange Traded Fund (ETF):
The day after the election, Wednesday November 4, witnessed the Dow Jones index trading 600 points to the positive. The I-Fund, interestingly, ended the week as the top performer. In addition to US markets, stocks in France and Germany also rallied.
Not to be outdone by equities markets, Crude Oil futures also traded higher, rising to $39 a barrel. Note that crude oil typically behaves in unison with equities.
I have posted on this site before the fact that the markets typically outperform under a Democrat as President. This is factually correct, however this should be clarified that the best performance is when a Democrat is President, with Congress under Republican control. The market seems to prefer a checks-and-balance mechanism. I am not advocating for one party or another (and the stock market is just one part of the universe, which must include law and order and a strong military), nor am I telling you who to vote for in the now-past election. I am merely posting historical market facts. See chart:
All of the recent action has been on above average volume, with the QQQ and SPY ETF’s gapping up. This is a very bullish behavior, and is further explained at this link: https://www.investors.com/how-to-invest/investors-corner/breakaway-gap-the-art-of-the-breakout/
The solid performance continued into November 5, with the Dow Jones going up 600 points. That day, the tech heavy NASDAQ had its best 3-day run since April.
On Friday November 6, the markets “sold off” somewhat but this is reasonable to expect as most Fridays witness sell offs prior the weekends. Combine this with the huge run up during the week- it is normal for folks to take some winnings off the table.
Now that we know what happened with the markets, what do I expect to happen with the election? Let’s use parties, not names of candidates for this opinion based discussion.
Entering Friday night, the election results are still being processed. Quite incredible in today’s age of modern technology. At the center of my crystal ball is the State of Nevada. Also important is Arizona. Note that Fox News, my preferred source of news, has Arizona already called for the Democrats, which I agree with. You cannot win Arizona without winning Maricopa County, period, the end. 62% of Arizona’s voters reside in that county alone. And Pima County historically always votes Democrat (county overall). Pima County represents about 16% of Arizona’s voters. If Maricopa and Pima both prefer the same party, at 78% of the State’s voters, the math simply does not work for the other party to out-climb the wall in front of him via votes from the rural areas. The various late night cable shows that “Arizona is still in play”….in my opinion it is not.
This takes us to Nevada. With 6 Electoral College votes, if the Democratic candidate wins here, he wins the election, because per Fox reporting he already has 264 out of the needed 270 votes. He is already ahead in Nevada. Nevada is interesting because nobody who lives there, is actually from there. Well, almost nobody. Nevada has more residents from California, than from Nevada. Guess how California typically votes.
We also know that even in Red States, such as Texas, the “metro areas” voted more Democratic than they did Republican. This did not occur in Oklahoma and other strongholds, but those metro areas indeed were “less red.” In most all states, outlying rural areas voted Republican. Hold that thought. Let’s return to Nevada’s “still counting ballots” situation. As of Thursday night, Nevada elections officials stated that there were about 190,000 ballots still to be counted as the state continues to remain too close to call in the U.S. presidential election. About 90% of those remaining ballots, or about 171,000, are from Clark County. Source: https://twitter.com/NVElect/status/1324459947493519361?s=20
Clark County is the county that the city of Las Vegas sits in. With 2M+ population, this is clearly a metro area and as stated above, already has demonstrated a leaning towards the Democratic Party, at 53.7% Democrat, 44.5% Republican as of Friday November 6.
Short version: 90% of the yet counted ballots are from Clark County, a Democrat leaning county of metro area Las Vegas. We have documented history reflecting strong Democrat leaning in most metro areas across USA. Also, most residents of Nevada, are actually from California. Summary: My opinion is Nevada goes in favor of the Democrats. If it does, game over.
Arizona: already a done deal, per my commentary above. Per news media, Clark County will finish ballot counting on Sunday (Nov 8), and Pima County will finish on Monday (Nov 9). So it may be a long wait over the weekend.
Georgia: Despite a Democrat very slight lead, I expect this to ultimately go in favor of the Republicans. Going back to 1984, from the electoral college standpoint, Georgia has voted for Republicans, with the exception of 1992 when they voted for Clinton. For my purposes, I believe Georgia ultimately will finish ballot counting and it will favor Republicans.
In conclusion, we may know something in the coming days. It will be important to study how the markets respond, and react accordingly.
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Everybody have a good weekend….
-Bill Pritchard
