Mike’s Morning Brief – November 2, 2016

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Market opened lower again, with the DOW and S&P down 5 of the last 6 days.  DOW 18K and 2100 S&P are being tested.  It’s been a tough go.  The slide has been constant but shallow thus far.  Anxiety about the election is the obvious explanation.  But there’s anxiety about so much these days.   With just 6 days away from the vote, clarity is on its way.  Well, let’s hope…  The Fed releases its statement today, concluding its 2-day meeting.  Expectations are near zero for a rate hike today.  But they continue to remain elevated for higher interest rates before year-end.  The Market is assigning a 74% probability that interest rates go higher at the December meeting.  Earnings continue to come out with a mixed tone, but in actuality, the numbers have been pretty good.  Corporate executives seem to be thinking long-term, but are cautious near-term.  It makes perfect sense.  Crude continues to slide, with WTI below $46.  It was over $50 just last week.  The correlation between oil and stocks is still strong.  ADP reported a weaker private payroll number for September.  The official job report comes Friday.  Expect the volatility to continue.

The polls have tightened between Hillary and Trump in the wake of the FBI letter.  Momentum has swung back to the Republicans. A week ago, the Nate Silver FiveThirtyEight poll had Hillary with a commanding 87% probability of taking the White House on November 8.  Since the FBI investigation re-openend Friday, her chances fell.  She still is the strong favorite according to the poll, but it’s down to 69%. Nate Silver is a statistician for ESPN and ABC news, who has developed a proprietary statistical forecasting model that is used for sports, politics and other areas. Silver successfully predicted all 50 states in the 2012 Presidential election and 49 of 50 in 2008.  Silver’s model forecasts 299.8 electoral votes for Clinton vs 237 for Trump.  270 are needed for victory.  He is forecasting a 48.7% popular vote for Hillary vs 45% for Trump. Gary Johnson is forecasted to get 4.7% of the popular vote.  In the tightly contested Senatorial race, Silver projects a 65% chance that the Democrats retake control. That’s down from 73% last week.  The Republicans seem safe to keep leadership in the House.  These results support the base case for what the Market expects in our minds, and possibly wants.  A Hillary White House with Chuck Schumer leading the Senate and Paul Ryan leading the House could provide chemistry for compromise and deal-making.

Have a great day,


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