Markets & U.S. Election Hangup

It feels somewhat redundant to comment on the state of the markets for October, while at the time of writing (days after the US election) the President has yet to be announced. Fortunately, the markets were somewhat subdued over the past month with the S&P 500 oscillating between 3200 – 3500; fears of another major shock simply did not materialize. Meanwhile, the TSX performed virtually the same, trading in an equally narrow range between 15,500 – 16,500 and finishing the month at the bottom of the range. A bleak outlook for another round of stimulus before the U.S. election, a surge in reported COVID cases and mounting speculation for a contested election was enough to keep investors on the sidelines in October, despite a string of positive third quarter results from ‘A’ list companies. 
 
While it has not been our custom to comment on the current month, rather this is a review of the previous month, but given the fact we are in the midst of an historic contentious election in the U.S. we thought it prudent to break tradition and at least provide some colour before our opinion is rendered obsolete. In our view, regardless of which party takes the White House, at the end of the day a Republican majority remains in the Senate. Investor’s initial reactions to a potential Biden win, appear to be positive with solid buying activity over the first few days of post-election trading sessions. It is also highly likely that another round of stimulus will be approved in short order, and clearly, with such an equally divided government it’s hard to imagine any dramatic changes to the current policies in place, i.e. taxes and U.S. energy independence.
 
Regardless, the circus around the election will drag on, but the markets do not appear to be concerned. As a result, we refer to our previous commentary where we mentioned the daily price average trend line for 2020, and how it has literally mirrored the historical average daily price trend line for past election year cycles. Bottom line; despite the added volatility related to COVID and the current state of the U.S. election, we’re confident this trend will continue with a positive trajectory until year end. We  highlight our outlook for the TSX to finish the calendar year at 18,200 and the S&P 500 to finish at 3,650, which means at this point in time an announcement regarding the Presidency will simply be a positive catalyst for the markets to resume the trend.

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