It’s Election Day. How well priced is a contested result? - DAY AHEAD

The day ahead is Election Day in the US where voters will head to the polls to cast a vote for President Donald Trump or former VP Joe Biden.



  • Election Day is here!
  • Dow jumps 400 points in rebound from rough week
  • Apple announces new 'one more thing' event for Nov 10
  • Dollar rallies for fourth straight day after ISM manufacturing surges
  • Oil prices explode higher after comments by Russia on OPEC+ output



Dow 400 points

The Dow jumping 400 points today shows the exact same nervy trading that sent it lower hundred of points last week. We don’t read this as a ‘confident in stocks’ 400 points but more an 'I’m too uncertain to keep selling' 400 points. A 10-point Biden lead according to a poll from the NBC/Wall Street journal may have offered investors some more strength in their convictions. 

Dollar up six days running

Many have Biden down as a ‘dollar-negative’ President because of the implied extra deficit spending after stimulus but the dollar is up six days in a row. The dollar strength up until now had been more a function of how the outlook for Europe has weakened with the 2nd lockdowns and a pretty explicit signal of extra QE in December from the ECB. Today the dollar gains were off the back of domestic strength. Manufacturing activity skyrocketed in October to a 2-year high reading of 59.3 in the ISM PMI reading.

Apple early Xmas present

Presumably Apple had this event planned anyway irrespective of the poor reaction to its Q3 numbers but for apple investors it could offer some welcome opportunity for upside. Still you wouldn’t be able to see the enthusiasm in apple stock today. FAAMG was under pressure

Oil price rips

Having tanked on rising US inventories and plummeting demand expectations, there was better news on the supply side for oil on Monday. Russia was giving out the good vibes with talk of delaying the tapering of production cuts for another three months until after the second wave. With demand looking so soft, supply was the only real possible bullish catalyst for oil here.



Err… the US election! Though, of course the action will be on Wednesday.

Election Day

The nerves in markets have been palpable over this election. Although most will agree over the long term elections don’t change the big picture – there is so much going on in the short term that could swing one way or the other.

Not much can be said about this election that hasn’t already been said one-day out. From a markets perspective, Biden is baked into the cake but an elevated VIX index (fear gauge) tells you nobody’s ready to write off Trump completely. If The Donald does pull off another 2016, markets are not positioned for it and vol will rise even higher. The most likely reason for elevated vol is a contested result – also not really priced outside of the VIX – which is presumably being used as a hedge against buying equities for a blue wave - and could unwind quickly if Biden sweeps in.


Earnings: Aramco, Bayer, BNP Paribas, Associated British Foods (ABF) 

RBA rate decision (cut to 0.1% from 0.25% expected)

API crude inventories



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