Recapping my previous post, uncertainty is building as we move closer to the US Presidential election. Many investors are concerned and likely have begun looking for hedges to protect their investment portfolios. With bonds yields at historically low levels, the traditional 60-40 portfolio might not be the best asset allocation going forward. This week I again followed the headlines looking for ideas.
To begin, let us look at the S&P 500 for the last week of September and beginning of October.
S&P 500 Weekly Chart – September 28, 2020 – October 2, 2020
I have never shown short term charts, but after the presidential debate devolved into a shouting contest and President Trump tested positive for Coronavirus, I was curious to see how the market would respond. The result was the S&P 500 index rose 1.5% for the week. Moreover, the NASDAQ Composite gained 1.5%, and the Dow Jones Industrial Average was up 1.87%.
On Friday of last week, investors did not seem too concerned regarding the threats of no further stimulus. Investors might have seen the threats as a negotiation tactic as talks of another source of stimulus were happening. The hope of additional stimulus seemed to be what held the markets course upwards.
Monday was a positive day for the S&P, but then Tuesday came with President Trump’s announcement that he instructed his representatives to stop negotiations on a stimulus bill until after the election. What was the consequence?
S&P 500 Daily Chart – October 6, 2020
After 2:30 PM the S&P sharply reversed and ended the day in the red. More surprisingly, President Trump tweeted again that night about approving a stimulus package to help Americans in the form of a Stand-Alone Bill with no negotiations needed. What was the result of that second tweet?
S&P 500 2 Day Chart – October 6, 2020 – October 7, 2020
You guessed right. We are back into positive territory again.
October has been a month where the S&P 500 index has risen 70% of the time over the last 20 years. The Technology sector has outperformed the benchmark 80% of the time during the same period. This time, the tech sector faces more pressure with the possibility of a Biden election and Democrats proposing the breakup of big tech. We are seeing an interesting start to the month and as uncertainty builds it is challenging to analyze what single tweet will wield such power and significance.