23 Oct IS THERE A CORRELATION BETWEEN INTANGIBLES AND THE ELECTION?
The polls are saying and the market is pricing it: President Trump will not win on November 3. The obvious question at hand is this a correct conclusion?
Traders have been burned betting on one side before, such as the last presidential election, Brexit and numerous European elections where the establishment candidate victory was all but assured.
In my view there is a risk that the consensus for a Democratic sweep of power does not play out or the result being contested.
I will not again opine about the massive differences between the candidates’ economic proposals and the notion that increased government spending and intervention is believed today to be the elixir of superior economic activity, the inverse of reality.
I will instead talk about the possible correlation between the “traditional” campaign of Donald Trump of crisscrossing the country and the basement/social media campaign of Joe Biden and equity valuations. Which one is more effective?
Yesterday I wrote about intangible and tangible values, writing the intangibles now equate to over 80% of the value of the S & P 500 as per Bloomberg.
Again referencing Bloomberg, there was a follow up story discussing how systematic managers…aka “quants…” are attempting to rewrite their algorithms to value “intangible assets.” As widely noted “no lose” quantitative analysis has been crushed during the last 18 months given the massive rally in assets that no one can see or touch.
Bloomberg writes that if “intangibles” are capitalized, the massive valuations become less daunting. Moreover, it is suggested that such capitalization of intangibles will permit “quants” to discover value.
It is widely accepted that adopting such a change is galactical, defined as beyond radical, filled with subjective analysis and confirmation biases.
What does this possible change have to do with the election? As noted President Trump’s campaign is more traditional. VP Biden Campaign is virtual, almost entirely relying upon technology and social media…aka intangibles.
If Biden wins, the intangible campaign is perhaps more efficient than the tangible campaign.
It is often asked do the times define the leaders or the leaders define the times? I will ask a similar question…will the virtual Biden campaign confirm the value of intangibles, a variable that is more difficult to quantify?
Perhaps changing topics, falling under the heading of “just as an aside” and may impact early voting, according to Gallup 78% of Democrats are fearful of being infected with COVID. Only 25% of Republicans harbor similar fears.
Also, as per Gallup 64% of Republican men and 54% of Republican women are saying they are “ready to return to normal activities right now” while only 5% of Democratic men and 3% Democratic women fell the same.
Based upon the above data, can the argument can be made if Trump dominates exit polls by a wide margin on Election Day and given the strong probability that many of the early voters are Democrats, is a bigger upset than 2016 plausible? I think yes.
Commenting about yesterday’s market action, led by financials and energy, equities rose as lawmakers continue to haggle over a spending bill. The 10-year rose to 0.84% yield, the highest since June. Small caps also advance handsomely.
Last night the foreign markets were up. London was up 1.52%, Paris up 1.36% and Frankfurt up 1.11%. China was down 1.04%, Japan up 0.18% and Hang Sang up 0.54%.
The Dow should open flat as stimulus talks continue. The 10-year is off 1/32 to yield 0.86%.