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The markets today, Thursday, appear set for another volatile trading day as analysts and investors in Europe and North America sort out the implications of economic and political forces.
At time of writing, European markets are underway and major indicators are in the green, buoyed at least in part by Bank of England plans to pump £150 billion into the economy.
North American markets, viewed several hours before opening, are also in the green and appear set to continue the rally of recent days, notwithstanding the continuing drama of the U. S. federal election.
At time of writing, the vote counting continues in several states. While the result is still unclear, former Vice President and challenger Joe Biden appears headed to victory.
Meanwhile, President Donald Trump has not withdrawn his plan to appeal to the Supreme Court.
Several other parts of the situation remain unclear at time of writing. In perhaps the most important example, it is not clear that the Supreme Court will agree to intervene as President Trump has announced.
And if the Court does agree to intervene, it is not clear how long it will take to reach a decision, even if the case is expedited. And at this time, it is not clear whether a Supreme Court decision would have a substantial impact on the final results.
The likelihood of a gridlock in Congress and unlikelihood of serious cooperation between a Republican-controlled Senate and Democrat-controlled House of Representatives points to several important conclusions, according to a Reuters report.
It leads investors to be optimistic that major policy changes would be difficult, lending at least a measure of certainty to the outlook of some equities. In one example, shares in defense contractors Northrop Grumman, Lockheed Martin and Raytheon all rose, which the same Reuters report attributes to reduced chances of defense budget cuts.
What is unclear at time of writing is the net-net impact of the situation on the investing bulls, according to a Bloomberg analysis, suggesting that the current rally may continue. “They’ve faced down everything from the fastest bear market in history to barrels of oil selling for less than nothing,” says the analysis.
“After traumas like that, it’ll take more than a messy election to derail bulls in the 2020 stock market.”.
The Bloomberg report goes on to suggest a limited impact. “A close or contested outcome to the U.S. presidential vote was supposed to be Wall Street’s worst-case scenario. Now, it’s come to pass. Investors needed roughly an hour to shake it off.”
The COVID 19 pandemic may be a different matter. Investors will soon get three views of its impact on the pharmaceutical sector. Regeneron Pharmaceuticals Inc., rated as a ‘Buy’ by financial institutions such as Piper Sandler and Cantor Fitzgerald and as a ‘Hold’ by institutions such as Morgan Stanley and J. P. Morgan, reports its third quarter today. Investors will be listening for the outlook on the experimental cure used by President Donald Trump during his fight with COVID 19. High-rated AstraZeneca PLC also reports third quarter results today and all parties worried about the pandemic will likely look for an update on its plans to release a vaccine.
Tomorrow, CVS Health, rated as a ‘Buy’ by institutions such as Piper Sandler and Raymond James and a ‘Hold’ by institutions such as Oppenheimer and Wells Fargo, will report third quarter results, CVS will likely discuss reduced in-store traffic sales of non-prescription drugs and other products.
Disclosure: I do not own shares in any company mentioned in this column.