Stocks continued their epic descent last week. Posting five-consecutive down days. And capping off a nine-day streak of losses. The longest since 1980. Of course, that nine-day fall saw the market tumble 9.37 percent. Whereas this recent decline - though of equal tenure - only amounted to a 3.09 percent drop.
Rejoice, my friends, for the moment has arrived. As today's epic election culminates a democratic exercise begun some 227 years ago. Unfortunately, this ballot does not offer the opportunity to send General Washington back to The White House.
And while many despair over the choices proffered by the two major parties, the critical piece to remember is this: the system put in place by the nations' brilliant founders was designed to thrive regardless of the election outcome. Good candidates or bad, our democratic system and its attending checks and balances assures that the nation continues to offer hope, opportunity and the right to pursue happiness. Regardless of who holds the presidency.
Personally, we believe either candidate will likely be confined to a four-year term. As the nation's next executive will lack a clear mandate. And will likely face a recession, as well as war drums in the Middle East. Amid a myriad other problems wrought by today's complex geopolitical landscape.
Sam Stovall, of research firm CFRA, explained on CNBC last week that the odds of a Donald Trump presidency may be higher than many believe.
"Going back to World War II, the S&P 500 performance between July 31 and October 31 has accurately predicted a challenger victory 86 percent of the time when the stock market performance has been negative."
Well, from August 1st to Halloween the market drifted lower by two percent. And going into Monday of this week, the S&P 500 had dropped on nine consecutive days. Something it hasn't done in 36 years. The last time the S&P 500 fell for nine straight days? December 1980. On the eve of Ronald Reagan's presidency.
Earnings season continues in positive fashion. With 71 percent of companies reporting above-estimate earnings. And 54 percent reporting above-estimate sales. The Q3 earnings growth rate thus far is 2.7 percent. If that holds, it will mark the first time the index has seen year-over-year earnings since Q1 2015.
The latest round of economic data? Mostly weaker. October's ISM non-manufacturing index came in at 54.8. Down from September's 57.1, and below the 56 consensus estimate. New orders also dropped, coming in at 57.7 versus September's 60.0 level. October business activity was weaker, at 57.7 against September's 60.3 reading. Employment was notably lower, coming in at 53.1 versus last month's 57.2.
On the bright side, initial jobless claims rose to 265K. Higher than the previous week's 258K reading and above expectations of a 257K rise. The streak of sub-300,000 claims stands at 87 weeks. The longest such stretch since 1970.
Recent Fed-funds odds suggest the market sees a 72 percent chance of a hike at the mid-December meeting. Which makes sense.
U.S. corporate earnings are about to turn up. The election is over. PMIs are rising from France to China, so the world economy looks a bit better. After an awful few months, stocks in the health care, utilities and REIT sectors have been pummeled. So creating an opportunity for buyers who think either U.S. interest rates are not going up, or up much as well as opportunities for those who think the health care selling has been overdone.
For now, U.S. equity valuations are not cheap, but not over the top either, unless interest rates rise further on the long end of the curve. And despite the preternatural concerns about equities sitting so near their all-time highs, this traditionally portends good times ahead.
Finally, a huge tip of the hat to the Cubs and Indians. Who battled it out over the course of a magnificent and highly scrutinized seven-game series. One that received the best television ratings in years. Nor were spectators disappointed.
Enjoyed the way Jon Markman summed up the series: "What a win tonight for the northsiders in the tenth inning of the seventh game of the World Series - a game that had it all, ending a postseason that had it all, showing off what we love about baseball: no clock, no complaints, just two diverse teams of hard-nosed, never-say-die players and a couple of gifted, innovative managers who tore up conventions and played 3-D chess in a sport sometimes hamstrung by outdated traditions. Awesome."
That about says it.
How about some perspective?
The last time the Cubs won the World Series? 1908. Over Detroit. When the Dow Jones Industrial average was at 82. Today, it sits at 18,281.
The 10-year U.S. Treasury bond yielded 3.8 percent. Compared to today's 1.8 percent. And there were no tax-exempt municipal bonds. As the federal income tax would be born five years later in 1913. Oil was 72¢ per barrel. As opposed to the $45 a barrel costs today.
Radio was high tech. And in its infancy. So people learned of the Cubs through the newspaper or word of mouth.
The 1908 Presidential election was won by William Howard Taft. A Republican Secretary of War and Theodore Roosevelt's hand-picked successor. He soundly defeated Williams Jennings Bryan. A Democrat and a Populist, who was running for the third time after having lost in 1896 and 1900 to William McKinley. At the time, the United States comprised 46 states, with Oklahoma having joined the union just the previous year.
In other words? It was a long time coming. Congrats to the Cubbies and their fans. As for the rest of you, please join me in wishing upon them a fresh 100-year curse beginning next year. Stay tuned...
Weekly Results
Major indexes finished down this week. DJIA lost 1.50%, S&P 500 fell 1.94%. The Nasdaq fell 1.28%. While small cap stocks lost 1.44%. 10-year Treasury bond yield fell 7 basis points to 1.77%. Gold closed up $28.90 per ounce, or 2.27%.
