Despite the best efforts of the Chairman and his cohorts, there was little they could do to prevent Monday’s wholesale one-day slaughter of the equity market and the spreading fear that a Democrat "blue wave" election was not going to materialize.
What some corners had been talking openly about for weeks - A Biden victory over the Bad Orange Man, Donald Trump, and a sweep of the senate, giving Democrats a troika of power with the House added in - all of a sudden seemed to be less certain. It was something Wall Street professionals were banking on, because complete control of the purse-and-policy strings in the nation's capitol by liberal Democrats would likely result in bucketsful of cash flowing to the money center in Manhattan.
What the Wall Street crowd wants more than anything out of this election is four more years of easy money policies, making their world safe from regulation and scrutiny, or so the thinking went.
However they were playing their cards and their money, there was a sneaking suspicion that the polls might be wrong, that President Trump was indeed winning hearts and minds and might pull along some of the Republicans in hotly-contested senatorial races with a week to go before all the votes are counted. That was always a possibility and the hedging of their bets was evident in trading the prior week, which was manifested in selling into strength rather than buying of dips. Lower highs and lower lows became more typical as the week wore on and by Monday, the trickle of dissent became a flood of angry traders relentlessly banging on their sell buttons.
Stocks took a major tumble on Monday, and the likelihood of a continuation - with possibly a brief respite Tuesday, even Wednesday of this week - of a downward spiral appeared not just possible, but probable. After all, any talk of a stimulus bill prior to the election had also been scrapped by Friday, so that helping hand had been withdrawn. There might not be another stimulus (read: free money) after the election or even after inauguration if Trump won and Republicans held the Senate.
After Monday night's senate confirmation of Amy Coney Barrett to the Supreme Court - filling the vacancy created by the death of Ruth Bader Ginsberg - the 6-3 conservative majority on the high bench had been obviated. Trump and loyal Republicans celebrated the swearing in at a White House celebration. The outrage from Democrats would sound hollow to the American public Tuesday morning as races tightened, the veracity of polling again being brought into question. The volatility index (VIX) was bounding upward, futures were trending toward the flatline, and European stocks were under pressure, signaling that the markets might be poised for a dead cat bounce preceding another bloodbath for stocks.
It would not come as a surprise to anybody if the selloff continued all the way through to election day, with little respite in between waves of anxious unloading of stocks, prices falling back below trend lines.
Stay tuned. This is just part of the second leg down of a confirmed bear market.
At the Close, Monday, October 26, 2020:
Dow: 27,685.38, -650.19 (-2.29%)
NASDAQ: 11,358.94, -189.34 (-1.64%)
S&P 500: 3,400.97, -64.42 (-1.86%)
NYSE: 12,936.38, -263.48 (-2.00%)
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