Many Americans face hours-long lines for early in-person voting

We are now 8 days from the national election. Former Vice President Joe Biden continues to hold a substantial lead over President Donald J. Trump in national polls. Measures of stock market volatility have quieted down as investors are beginning to ponder what a Biden administration will mean for the economy and the stock market.

We remain cautious in our expectations. Donald Trump has given us numerous surprises over the past four years and investors should not completely discount his ability rally his base and somehow pull off a victory in the electoral college.

Coronavirus Aid Package
The one thing we thought could really move the stock market over the past few weeks was the passage of additional aid for workers and their families, businesses and state and local governments. The economic recovery has slowed and that millions of Americans are suffering.

The House passed a substantial bill in May. However, despite ongoing dialogue between House Speaker Pelosi, Treasurer Secretary Mnuchin and the White House, it is clear that a deal will not be reached before November 3.

If Biden wins the presidential election and the Democrats retain the House and gain control of the Senate, we can expect a massive package to be passed early in 2021. If Biden wins, the Democrats keep the House and Republicans retain the Senate, we will likely see a smaller package and it may be passed before the end of the year. If Biden wins and the Republicans retain the Senate and regain the House, we will see more gridlock in Washington.

If Trumps wins a second term, the Republicans retain the Senate and the Democrats retain the House, we will see more wrangling over the size of the package. If Trump wins and the Democrats retain the House and regain the Senate, Trump will be able to control the size of the package he signs. The same is true if Trump wins and the Republicans retain the Senate and win the House. If Trump wins and the Democrats end up controlling both the House and the Senate, Trump will hold veto power.

Investors know how important additional federal aid is to the recovery. The Federal Reserve has done what it can and it has been unusually vocal about its support of additional fiscal spending by the government. The longer it takes for the government to provide additional support, the slower the recovery will be. Also, the smaller the size of the support, the longer the recovery will take.

The Markets
On Friday, the Dow Jones Industrial Average was down 73 points, or 0.26%. The S&P 500 index rose 12 points, or 0.34%. The Nasdaq increased 42 points, or 0.37%. All three indices were down for the week.

The yield on the 10-year Treasury Note was up at 0.841% on Friday. Spot gold traded at $1,905 on Friday. West Texas Intermediate Crude futures for December 2020 delivery traded at $39.85 a barrel.

Globally, across 213 countries and territories, there have been nearly 42 million confirmed cases and over 11 million deaths. In the United States, over 8.6 million have been infected and over 225,000 have died.

The virus is surging in many parts of the world, including in the United States. The spike which health authorities have warned about for months is occurring, as people have relaxed their efforts to remain safe (e.g. wearing a mask, avoiding groups, and physical distancing).

There are many aspects to what is happening with the virus and we can see several in the bar chart below. Testing continues to expand. Testing tells us who is infected which, of course, we need to know. Identifying those who test positive allows health authorities to isolate and treat them and to conduct comprehensive contact tracing.

The rising rate of positive test results is concerning. That indicates that the virus is spreading. The World Health Organization recommends that governments continue containment measures until the positive test rate has remained below 5% for at least two weeks. Unfortunately, many areas of the United States are experiencing a rapid increase in infections and the nation itself is setting new daily records for the number of Americans who test positive.

JHU Testing and Positivity Rates

Source: Johns Hopkins University

These images tell us more:

COVID Tracking Statistics

Source: https://covidtracking.com/data#summary-charts

As we have seen, testing continues to expand. The rate of new cases is rebounding off the lows. The rate of hospitalization is rising again. The fatality rate continues to drop.

So, more people are getting infected, but fewer are dying. The drop in deaths indicates that younger, more resilient people make up a greater percent of those infected than earlier in the pandemic. In addition, infections are being diagnosed earlier and treatment for the virus has improved significantly.

NBC News Covid Deaths

Source: NBC News

If you are curious about what is happening around the world, check out this interactive map (below) at Our World in Data. We can see that much of Europe is in trouble again. China has been able to corral the virus and it is expected to be the only nation with positive economic growth in 2020.

(click on the link for the interactive map) https://ourworldindata.org/coronavirus


The bottom line is that the virus continues to influence virtually all human activity at least to some degree. It is highly contagious and, while less so, still deadly. Until effective vaccines are widely available, we will need to continue to take measures to avoid contracting it.

The Labor Market
The number of Americans filing for state unemployment benefits fell in the week ending October 17 to 787,000. This is still a historically high number, but it is an extension of a downward trend as illustrated below. The Labor Department adjusted the number for the week ending October 3 to 767,000.

The economy is healing, slowly. As we have discussed, further progress will be driven by the coronavirus and the governments efforts to combat it.

Unemployment Claims 2020 10 17

Source: https://tradingeconomics.com/united-states/jobless-claims

November 3
We will know a lot more about what’s in store for investors in about a week. Please vote!

Keep the faith, be safe and stay healthy.

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