Equities stumbled the most in four months.  There were numerous catalysts.  Rising COVID cases.  Reality setting in Biden could win thus ushering in an unprecedented wave of greater regulations and higher taxes amplified by a potential radical rewrite of society and parts of the Constitution.  To technology hearings on Capitol Hill where there is bipartisan support to diminish their influence.  Several high-profile earnings reports from the mega sized tech firms indicating profit growth will slow in the coming quarters as six years of sales have been front loaded into six months.

In other words, the proverbial Wall of Worry is rising.

I would like to add another possible catalyst.  As widely noted, the media/polls are indicating a Biden victory and the possibility of a Blue Wave.  What happens if the polls/media are wrong?  Will the markets begin discounting an information vacuum, questioning the integrity and credibility of many analysts and experts and the process in which they draw conclusions?

Wow! Some might think this is radical.  But is it?  The greatest shocks to the markets are improbable or unexpected events.  As noted many times 2020 has been the year of Black Swans and such is the trend.  If the trend is your friend such a conclusion is indeed plausible.

As noted yesterday, today third quarter GDP is released.  Growth is expected to mirror that of the second quarter decline.  Consensus is expecting a 32.0% annualized growth rate, a 38.9% gain in personal consumption and a 4.0% increase in the core PCE.

After the close, APPL, FB, AMZN and GOOG earnings.  Second quarter results for all four surprised on the upside.  Third quarter to date, most of the marquee technology names have disappointed, defined as warning that the growth rate has slowed, stating that COVID has front loaded their results.

Speaking of profits, Bloomberg reports 85% of S & P 500 companies that have posted results have exceeded expectations, the best showing since the 1993 inception of this data point.

Last night the foreign markets were mixed.  London was up 0.31%, Paris up 0.30% and Frankfurt up 0.56%.  China was up 0.11%, Japan down 0.37% and Hang Sang down 0.49%.

The Dow should open nominally higher  The 10-year is off 1/32 to yield 0.78%.


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