ALGOS RULE!

The market is suggesting it is a forgone conclusion that VP Biden will be elected and the odds of a “blue wave” is rising.

Many times, I have commented about the massive influence that technology and algorithmic trading have upon the market.  Dated SEC statistics suggest 90% of volume is the result of super-fast trading based upon words in headlines.

Friday House Speaker Pelosi held a press conference introducing legislation to establish a Commission on Presidential Capacity.  Most will readily admit this is nothing but an election stunt. With this written Bloomberg writes.

Algos will be parsing her every word and the potential for swings in the market could create both opportunities and pitfalls.  The markets are entirely dominated by headline investing.  Algos will also be parsing all statements relating to the process of the stimulus talks, the primary driver of markets in recent days.

Bloomberg further opined that volatility could increase in the coming days especially if the expectations of a Biden victory is challenged given the propensity that such is an “accepted” reason for the recent rebound.

There is a distinct minority questioning the strength and depth of his support as well as the accuracy of polls given numerous examples when the actual outcome was the inverse of the largely expected outcome.

Speaking of stimulus, the White House Friday announced a $1.8 trillion stimulus plan, further stating that he would really like to propose something larger than what the Democrats are proposing.   The President acknowledged that he is going in the “exact opposite direction” to his earlier stances.

It is thought the chances of anything passing before the election remains low with the Senate opposed to an expansive program and Senate Majority leader saying his priority is the Supreme Court nomination.

Wow!  Equities advanced on the issue under the simple premise that a massive aid package will occur, with the only question is as to when.  Treasuries reversed gains to close almost unchanged.   and Treasuries declined causing the yield curve to steepen.

What will be the unintended consequences of such unbridled spending?  If this proposal is passed, the federal deficit would surge to over $29 trillion versus $21 trillion at the commencement of the fiscal year 2019-2020.  This is unprecedented.

What will happen this week?  Trading may be muted today given that it is Columbus Day.  Various inflation statistics, retail sales and manufacturing indices are released.  Moreover, third quarter earning season commences.

Last night the foreign markets were up.  London was up 0.02%, Paris up 0.62% and Frankfurt up 0.41%.  China was up 2.62%,  Japan down 0.26%  and Hang Sang up 2.20%.

The Dow should open flat.

The bond market is closed for Columbus Day.  There are several influential firms suggesting the US government is already experimenting with MMT, or Modern Monetary Theory, a fiscal policy where governments can print money with no adverse consequences if the debt is issued in and the country is able to control its own currency.  Most have rejected such a notion but as stated some are suggesting the US is already going down this path.

 

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