Nov. 2, 2020 - This week is going to busy for investors.
This may be the biggest week of earnings season. There's a Federal Reserve announcement scheduled for Thursday. The monthly Employment Situation Report for October will be released Friday morning. And there's also elections for President, one-third of the Senate and the entire House of Representatives and countless state and local offices, plus constitutional amendments and other ballot questions.
Monday's rally seems as much like a bounce-back from last week's losses as a new tone for the market. Energy stocks rising even as oil prices fell seems to suggest that for at least some of the day's big gainers, the rally wasn't closely tied to fundamentals.
It's hard to predict what the market will make of the election. In 2016, the market fell in the weeks before the election as polling tightened between the two candidates, even as Hillary Clinton remained the favorite in most models. On election night itself, as it became clear that Donald Trump would win, futures markets fell sharply, only to rally by the next morning when a months-long rally began.
So, the market fell as polling and then actual vote counting started to indicate a less-expected outcome only to rally once that same outcome became the reality. This makes trying to predict what the market will do based on the possible outcome of tomorrow's election seem impossible. One thing we can say is that the market prefers certainty to uncertainty. A long, drawn-out process is likely keep a lot of traders on the sidelines, potentially delaying the market's eventual reaction.
We wrote about earnings a bit on Friday. This week's calendar lacks the big names of last week, but there are a lot of hot stocks that fall into the "priced for perfection" category.
The Federal Reserve is unlikely to make many changes to monetary policy this week. It will be interest to see how the central bank navigates the potentially changing political landscape. The Fed has been calling for additional fiscal stimulus for months now, so we'll be interested to see the tone those calls take with either new leadership in Washington, or a similar cast of characters at the helm.
Friday's jobs report is likely to seem pretty anti-climactic after everything that's going to happen between now and then. Analysts expect the economy to have added about 600,000 jobs and for the unemployment rate to fall to 7.6%. Of more importance than the headline numbers will be the number of people who permanently lost jobs during October. The last several months of jobs reports have had two competing narratives, temporarily laid-off workers returning to their jobs and other workers permanently losing their positions. Those permanent job losses are going to slow the economic recovery, and the larger that number gets, the slower the recovery is likely to be, regardless of who the president is.
With so much on the calendar, and so many questions potentially unanswered by the end of the week, continue volatility seems like it may be the only safe bet this week.
Economic Events this Week
Tuesday- 10:00 a.m. - Factory Orders
- 8:15 a.m. - ADP Employment Change
- 10:00 a.m. - ISM Non-Manufacturing Index
- 10:30 a.m. - EIA Crude Oil Inventories
- 8:30 a.m. - Initial/Continuing Claims
- 8:30 a.m. - Productivity / Unit Labor Costs
- 2:00 p.m. - FOMC Rate Decision
- 8:30 a.m. - Nonfarm Payrolls
- 8:30 a.m. - Unemployment Rate
- 10:00 a.m. - Wholesale Inventories
- 3:00 p.m. - Consumer Credit