Weakening Wednesday: Presidential Debate Spooks the Market

Well that went as expected.

Yesterday we titled our Morning Report: Testy Tuesday – Shorting the S&P 500 at 3,350 and we made a lovely $1,250 per contract on our shorts and got another chance to get in at 3,350 in last night’s futures. And we have another dip as the markets started selling off for exactly the reason I predicted yesterday: President Ponzi will debate Sleepy Joe Biden this evening and that’s going to be depressing. Much as we need to get rid of Trump, Biden is simply not an exciting alternative.

Debates are a time when we talk about what’s wrong with the country and, unfortunately, there’s a lot wrong with the country and neither candidate seems like the guy who’s really going to fix it, although at least getting rid of the guy who is breaking it couldn’t hurt.

It’s like when you hire an incompetent plumber and your house is filled with backed-up sewage — you don’t tend to say “Let’s give this guy 4 more years.” Sometimes any alternative is worth a try and that’s what the Democrats have given us this year — “Biden 2020, he’s not Donald Trump.”

“Markets seem to be getting more concerned, with VIX futures peaking around the election,” said Edward Park, deputy chief investment officer at Brooks Macdonald. “But whoever takes over, and however long it takes to take over, the person will be facing a battle against coronavirus.”

Delays to fiscal stimulus on both sides of the Atlantic are also a worry for investors, who fear economies will need fresh support in the absence of a clear timeline for a coronavirus vaccine.

While U.S. lawmakers are trying to find common ground on a deal ahead of the election, a German government spokesperson late Tuesday warned of possible delays to the approval process for the EU recovery fund.

“For financial markets, there’s a growing understanding that it was a V-shaped rebound, but that doesn’t mean it will be a V-shaped economic recovery,” said Carsten Brzeski, an economist with ING Bank in Frankfurt. “Any delays in fiscal stimulus will add to that realization.”

Shares in Disney (DIS) fell 2.7% ahead of the opening bell after the company said it would lay off about 28,000 employees at its domestic theme parks, shortly after the state of California signaled that Disneyland Resort would likely have to remain closed for the foreseeable future due to Covid-19 concerns.

Meanwhile, another 1,000 Americans died of coronavirus while Trump was telling Biden what a great job he was doing, and 40,000 Americans were infected yesterday — 2,500 new infections during the 90-minute debate.

Consumers were a little more confident about the economy in yesterday’s survey but not as confident as Wall Street Journal headline writers were when they said: “Conference Board index surges to 101.8 in September amid improving labor market and receding coronavirus trends.”

Yes, this is the chart that went with the word “surges.” The share of respondents in the Conference Board’s index reporting jobs as “plentiful” climbed to 22.9% in September, from 21.4% in August — and compared with just 16.5% in May.

So 22.9% of the people in this country are idiots who believe anything they see on Fox despite all actual evidence to the contrary? I’m not sure if that makes me more confident…

The unemployment rate is 8.4% — that’s considered a crisis in normal times. The preliminary September reading of the University of Michigan’s index of consumer sentiment, released Sept. 18, registered a less dramatic increase, climbing to 78.9 for the first half of the month.

It was also the highest level since March, though it rose only 4.8 points over August. The University of Michigan will publish its final reading for the month on Friday.

While the labor market continues to recover, real-time data suggest momentum has slowed. The share of small-business employees working who had logged hours in January fell slightly in September, according to Homebase. This reflects in part a sluggish spending on services, which has recovered much less than spending on goods.

“Yes, jobs are returning and the federal income support has been a big income booster and equities have more than recovered their losses, but worries about the virus continue to linger and will continue to constrain how we go about our daily lives for many more months,” said James Knightley, chief international economist at ING.

Unfortunately, we don’t have months. Voters are going to have to choose between reality and fantasy in just over 30 days and God help us all if they choose wrong.

Is this the real life?
Is this just fantasy?
Caught in a landslide,
No escape from reality.

Too late, my time has come,
Sends shivers down my spine,
Body’s aching all the time.
Goodbye, everybody, I’ve got to go,
Gotta leave you all behind and face the truth.
– Queen

Remember having fun?

Get more analysis and specific options trades from Phil Davis by subscribing to Real Options Investor.

Recommended Articles

Delaying Retirement Can Potentially Delay Dementia

They say that retirement should be viewed as a new life adventure. But it is really a budgeting lifestyle for post-working life. And there are a lot of considerations to

Attention Ladies: These Herbs Are Important to Your Health

Women have so many demands on their bodies and minds that any relief is a blessing. That is why you need to start taking these herbs to help increase your

4 Rules That Will Bombproof Your Retirement

Financial markets often are directly correlated to the macroeconomic, social and political factors far out of our control. Herds of investors are prone to reacting in extremes whenever these macro

4 Types of Retirement Income That Will Be Taxed

As well all know, expenses may change from one year to the next, and the amount you spend may change throughout retirement as well. That's why, for many current and

Study Finds Risks of Two Commonly Taken Antidepressants

Depression is a serious mental illness — one that affects more than 15 million adults in the U.S. For some women, pregnancy can bring about new depression symptoms, or worsen

Live Near Water? You Probably Paid Too Much for Your House. Here’s Why (Map)

Even a cynic recognizes that opportunity is a key to prudent business timing. Consider home buying. If you’re in the market for a new home, and are informed and discerning

3 Reasons to Should Avoid Life Settlement Policies

Most Americans don’t take life insurance for granted because almost one out of every two Americans don’t have it. According to the Insurance Information Institute, only about 54% of Americans

Feeling Hangry? How to Avoid Food-Related Mood Swings

Food that you eat is processed into simple sugars, free fatty acids and amino acids. The nutrients are moved into the bloodstream where they are assimilated by organs, tissues, and

How to Put Your Investments On Autopilot — and Win

Are you committed to investing a part of your monthly income towards retirement? You can insulate your financial future against unforeseen emergencies and economic risks if you use an automatic

Best Time to Sell or Buy a Home? It Depends…

When's the best time to buy or sell a home? That's a great question. A lot depends on who you are, seller or buyer. Traditionally, the best time of year

6 Sneaky Habits That May Be Causing Your Overeating

Overeating? Many people vastly underestimate how many calories they consume in a day. Even if you believe you restrict your daily calorie consumption, you may be consuming more calories than

How Shark Tank Judge Barbara Corcoran Nearly Lost $400,000 — Just by Reading an Email

According to a 2017 FBI Internet Crime Report, individuals and companies lost over $5.5 billion between 2013 through 2017 due to email phishing scams. Email phishing scams are deceptive emails