The Latest 'My Take' From Joe Stango

Reprinted with permission

The markets suffered one of their worst weeks since March of this year. They were reacting to news of continued political uncertainty, the shutdowns happening in Europe, the increase in the virus numbers both here and abroad and the realization that no stimulus package would be happening. Investors are now beginning to realize that we may not see another stimulus package until early next year. All of this happened despite a good show of consumer confidence with unemployment lines shortening to a new pandemic low, economic growth that topped 33.1% and personal income on the rise.

The volatility may continue this week for a couple of reasons. First is the pending election tomorrow: it isn’t the outcome that will help to stir volatility it is the possibility of not knowing who may have won the presidential election and which party will control the senate for several days. If the count drags on it will not help the sooth nor give investors confidence over pending policy adjustments. This, however, will be short lived once there is clear evidence of who will have won.

Secondly, the fear of a double dip recession now that lockdowns are in place will strike fear in the hearts of our markets as concern grows that we may also see a second dip. However, without pending lockdowns in our country we may merely experience a leveling off of growth as people prepare for a cold winter living with the disease.

However, what concerns me most in the short term is the Fed meeting that will begin on the fourth of November and conclude on the fifth. If the markets don’t sense the Fed offering some “comfort” we may experience volatility for a protracted period. If they offer some relief in the face of no Fiscal stimulus until the new year we may see a leveling off. As of now we have had three drivers in the market: Fiscal stimulus offered by Congress, monetary stimulus supplied by the Federal Reserve and the resulting economic growth from both. As of now additional fiscal stimulus is stalled and economic growth is leveling off. This leaves the actions of the fed and its continued monetary stimulus in play. You can bet all eyes and ears will be on the fed actions in on Wednesday and Thursday.

I’ll be on the radio at 10:10 EST on “Talk of the Town” with host Steve Noxon to discuss all of this and more. You can listen in at www.watr.com.

In the meantime, please stay safe!

Sincerest Regards,
Joe

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