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As we go head-first into November 3rd’s U.S. Presidential Election, here are a few not-so-obvious trends we see shaping up. These do not say a thing about who will win the election. Nor are they trends that are certain to last into 2021. But frankly, the way 2020 has gone, is anyone really thinking that far ahead?
Asia: further along the Covid curve?
An index of large, Asia-based stocks we track reached a new all-time high this month. So did the NasdaqNDAQ-1.1%, here in the U.S. However, based on the publicly-available data, Asia appears to be further down the road toward some sort of normalcy. Perhaps that is starting to be reflected in stock prices.
The Japanese Yen is strengthening a bit versus the U.S. Dollar, and China’s currency (the Yuan) has been flying since June. After a very long period of international stocks underperforming the S&P 500, there are growing signs that a change is at hand.
Energy stocks: a lost cause no matter who wins?
We don’t pay much attention to what Wall Street thinks about things like “which candidate is better for energy stocks?” and the like. What we do see is what continues to look like an endless downward spiral for traditional energy stocks. And, while alternative energy companies have seen their stock prices skyrocket since March, it is possible that whatever long-term potential those had as investments just happened.
Perhaps a more direct impact to many investors is the so-called “infrastructure” investment theme. We all know we need to reboot our highways, bridges and such. However, Wall Street likes to attach the word “infrastructure” to investments that are closer to traditional, run of the mill industries like utility and communication stocks. The result is that infrastructure funds don’t look like amazing bargains.
Bonds: overvalued bonds
The charts we follow have a sneaking suspicion: that long-term interest rates on U.S. Treasury securities are heading higher. We are quick to point out that there have been dozens of times where that appeared to be the case the past several years. Each time, rates popped higher, then returned to their near-zero levels.
Maybe this time will be different. Or, perhaps it will just end up being another nice trade. Or, maybe nothing will happen. Bonds can be like that. But by one longer-term measure we track, the yield on the 10-year U.S. Treasury is more ripe to run higher than…ever. That is, at least as far back as 1965, when our data begins. With our national debt where it is, it’s fair to say that it will be a thorn in the side our next President, regardless of who that is.
Our best suggestion for the coming weeks of anticipated turmoil in politics and markets? Have a process, and look at this as a hedged investor does any market environment: as an opportunity to capitalize on whatever circumstances arise.