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Things you need to know:

  • Tale of Two Cities
  • Stimulus talks on again/off again
  • 46 US states reporting uncontrolled spread
  • Europe and South America feeling the same pain
  • China reports better eco numbers (or so they say)
  • Try the Deep-Fried Turkey

Stocks ended the week higher on Friday… even though the day’s action was mixed. It was more of the same… Election drama and mail-in ballots (of which 27 million Americans have already been received), talk of how different the two town halls were, with Trump under fire from Samantha Guthrie as a mixed crowd filled the space, while the Biden town hall was packed with sympathizers and softball questions from Georgey Stephanopoulos and other high ranking ‘planted’ Democrats. It was – as you might expect a tale of two cities.

[This 1859 novel by Charles Dickens (regularly cited as the best-selling novel of all time) is set against the conditions that led up to the French Revolution and the Reign of Terror – Wikipedia] Just sayin’… think about it for just a minute…

On the fundamental front – Investors and traders looking for any economic signal that might suggest an economy in motion (which it is) and any signs that House Speaker Nancy Pelosi and Treasury Secretary Stevey Mnuchin are making headway in their stimulus package discussions (which they are not – all while Trump told the GOP to ‘Go Big or Go Home’). And the virus? That continues to surge around the world – with little impact on investor psyche… I mean by all accounts – the world is a mess… a map of the US is now mostly deep RED – indicating ‘uncontrolled spread’… only Maine and Vermont are trending better, while California, New York and New Hampshire are waving the caution flag – everywhere else is described as a ‘disaster’. Canada is on alert but has remained in control.

In Europe we see the major countries – UK, Spain, France, Italy, Portugal, Greece, Poland, Romania, all in RED – while the virus appears to be under control in Africa, (with the exception of Libya), Asia – including mainland China, North/South Korea, Japan, Singapore, Hong Kong, and the chain of countries in the South Pacific including Australia and New Zealand appear to be in the best shape while Russia, India, Iran, Germany, Austria, Brussels, Sweden, and the Mid-East are on alert. In South America – Colombia, Costa Rica and Argentina are in the RED zone, while Brazil, Peru, Chile & Paraguay are on alert. Bolivia, Mexico, Honduras, Uruguay and Venezuela are in control.

All this AND the US market is much closer to its September highs than to the March lows… The S&P closed at 3483 on Friday – about 80 points or 2.8% below its September all time high – while sitting 1292 pts or 58% above the March lows when this whole thing hit us like a ton of bricks – yet by all accounts you can say – the world is in worse shape (from the virus perspective) – never mind the antics going on in DC between Pelosi/Mnuchin and the concerns over what the election will produce in a matter of days. But here is the explanation for that… while the virus appears to be in overdrive – the world has made great strides in therapeutics, and while infections are up – deaths are in decline and a vaccine is on the horizon – with a number of companies applying for emergency use authorization (EUA). Pfizer, Gilead, Regeneron, Eli Lilly, AstraZeneca, etc… In addition there are a handful of other bio-techs in the race for a cure… so it appears that investors are no longer traumatized by this virus and are putting it in perspective but not allowing it to cause them to panic…in fact – quite the opposite – as earnings season has (so far) produced strong reports (very low bar) and economic macro fundamentals all appear strong. And while the political drama does create chaos – it is much more short term oriented than not… once we know who wins – the market will re-price… so get ready – as the re-pricing is usually lower…

Eco data this month has been strong… Construction spending, ISM reports, Personal Income/Spending, Markit PMI’s, NFP reports, Unemployment, Avg Hourly earnings, Factory Orders, Durable Goods etc. have all been strong. Friday’s eco data showed that Advance Retail Sales were more than DOUBLE the expectation and ex autos and gas it was THREE times the expectation. Industrial Production and Capacity Utilization were weaker, but that flies in the face of all the stronger reports… so there is a disconnect somewhere… Word from some of the online retailers talking about strong demand across the board and what a ‘blow out’ holiday shopping season they expect. The old line ‘Black Friday Sales’ now being replaced by revolving constant sales that are designed to ‘steal your money’ by never being ‘off’. And UPS and FEDEX are gearing up for millions of packages which they have already said may not make it by Christmas! (Is it me?) Again – there is that theme – The Tale of Two Cities – on the one hand you have some people telling us how bad it is (and it is) while others are telling us that things have never been better and you better get out and shop now before it’s all gone! (It’s mind boggling really…)

By the end of the day the Dow added 112 pts, the S&P advanced by ½ a point, the Nasdaq lower by 42 pts and the Russell off by 5 pts. Now the Nasdaq is under pressure because more talk of ‘breaking up’ the FAANG stocks continues… and Twitter’s decision to ‘block’ a NY Post article that was NOT flattering for Joey and Hunter (just weeks before the election) caused all kinds of discussions on Friday and all weekend and will continue to cause discussions as we try to navigate the mess that silicon valley created. When did Jack Dorsey get to decide who lives and who dies? Who gets to decide what ‘we’ think? By arbitrarily blocking content – he has chosen to make a decision on what Twitter users will and will not see… right or wrong – that is a slippery slope. Is he saying that Americans are not smart enough to sort through the headlines so he must play the role of the internet police? Isn’t that what China, Russia, Iran, Venezuela, Cuba and an assortment of others do? Last time I checked – I lived in America – ‘the land of the free and the home of the brave’. But that is another story…

This morning we wake up and find that global markets are higher… China kicked it off by reporting that 3Q GDP grew by 4.9% vs. the expected 5.2% – yes, a bit weaker than the expectation but much stronger than 2Q GDP at +3.2%. At the same time, they also reported that retail sales rose by 3.3% y/y – a bit stronger – which is what we are seeing in the US. Asian analysts all caught by surprise on both fronts. Vasu Menon – Executive Director at OCBC Bank (Singapore) told CNBC’s Street signs Asia that:

“The headline numbers seem like they’ve missed the mark, but when you drill down to the details, especially domestic consumption, I think that offers some room for optimism. Bear in mind that 4.9% is still a decent number – especially given the current environment.”

The China recovery story is alive and well – along with improving retail sales, industrial production also gained – keeping that economy on track to be a major growth story this year. These latest reports show that China’s early containment of the virus has allowed for a faster recovery than many other countries. Central bank Governor Yi Gang telling us that China has ‘pro-active fiscal policy and an accommodative monetary policy to support the economy’. And that is because Xi Xi is not up for re-election (ever) so there is ‘NO’ political drama there to sidetrack the efforts. By the end of the day – Japan + 1.1%, Hong Kong + 0.64%, China – 0.76% and Australia was ahead by 0.85%.

In Europe – markets there are higher on vaccine hopes and US stimulus talks. Word that Nancy has given Stevey 48 hrs to strike a deal or not (that would end sometime tonight) are once again stealing the spotlight. However – continued difficult BREXIT talks and an uncontrolled covid 19 spread across much of the continent is keeping stocks from advancing with reckless abandon. The UK and the EU at odds over what their divorce will look like – telling each other to re-think their exit and come back expecting to compromise. UK PM – Bojo (Boris Johnson) saying the talks are over and that the UK should get ready to trade with the EU in January WITHOUT a trade deal… (more bluster – my sense is that there will be an 11th hour deal). In Italy – the PM is clamping down on the country again as the virus rears its ugly head. Yesterday more than 11k new infections were reported… (while death rates continue to decline). As of 6:30 am – the FTSE -0.16%, CAC 40 + 0.82%, DAX + 0.07%, EUROSTOXX +0.62%, SPAIN +0.44% and ITALY + 0.31%.

US futures are screaming higher… Dow +180 pts, the S&P +13 pts, the Nasdaq +125 pts, and the Russell are up 9 pts. And this as new virus cases continue to surge around the world… and Nancy and Stevey have yet to cut a deal… Recall that last week Donny announced that he and the GOP are ready to sign – that he is even prepared to go above her $2.3 trillion ask… so now what? What is her issue now? What is Nancy thinking? Is she betting on a Democratic sweep? Absolutely. T-15 days until the formal election… and while there are 50 states in the union it comes down to a handful of 9 ‘Swing States” Florida 29 electoral college votes (ECV), Pennsylvania 20 ECV, Ohio 18 ECV, Michigan 16 ECV, North Carolina 15 ECV, Arizona 11 ECV, Wisconsin 10 ECV, Iowa 6 ECV, Georgia 16 ECV with the latest polls showing that the Dems are holding a lead in 7 or the 9 swing states.

So, futures are higher because it is once again assuming clarity of thought… and if there is a Blue Tsunami that hits us – then watch what happens to the clarity of the markets… expect to get re-priced in the short term.Don’t’ forget you’ll get our friends at Goldy telling us how great a Democratic sweep will be – as Jan Hatzius and Davey Kostin look for cabinet posts in a Harris administration. (That is not a typo.)

Once we put this behind us – then the focus will return to the fundamentals… and expect every analysts/strategist to define the new economy based on what the political landscape looks like.

Economic data: None.

We are now in the thick of earnings… expect the number of reports to heat up… today’s include PPG, CCK, CDNS, STLK, IBM to lead the list.

Oil in retreat – as the media is blaming it on the weak China data??? What weak China data? We just discussed how GDP was better than 2Q, and retail sales and industrial production were stronger… so what you’re saying is that because 3Q GDP was below the ESTIMATE of 5.2% — never mind that it was above 3.3% in the 2Q that oil traders are disappointed? Or is it the algo’s that don’t understand the ‘intonation’ of the headline… Yes, 4.2% is below the expected 5.2% but that is baloney… the trend in China is UP, the trend in the US is up. And the surging virus cases are not impacting investors’ appetite – because they are also betting on a strong recovery… otherwise investors wouldn’t be paying these valuations if they thought the recovery was suspect… all 3 trendlines are converging around $40.60 and oil is trading at $40.60… so it’s anyone’s guess what happens next – you know how I feel… but let’s see.

The S&P closed at 3483 on Friday – essentially unchanged from Thursday… it did though test 3515 and it look like it is about to test that again today… if futures remain where they are – we can expect the S&P to open just above the century mark of 3500… and push higher… 3580 is the closing all time high… Watch what happens in DC today… will Nancy concede or not… Now she is screaming about the language, not about the money any more… so let’s be patient and watch what happens next. Just fyi – support is down at 3400… so for now it’s 3400/3580… and with volatility elevated – we could see swift moves in either direction. Sit tight and stick to the plan.

Take good care –

Kenneth Polcari
Chief Market Strategist, Consultant

Deep-Fried Turkey!

Becoming a thanksgiving favorite… Now you hear horror stories of people deep frying turkeys at Thanksgiving – it can make a mess… so you need to be careful and make sure you have an adult present at all times.

For this you need: a Turkey – washed and cleaned void of pop up timers as well as the bag from the breast cage, Peanut Oil, a deep fryer (you can buy at HD – an NYSE listed company), poultry seasoning (or you can make your own).

First determine the amount of oil you need. You do this by placing the turkey in the pot and add water until the turkey is completely covered plus an inch or two. With the turkey and the water there should still be several inches of room between the oil and the top of the pot. If it’s a close call, then you need either a bigger pot or a smaller turkey. Remove the turkey and measure the water. This is the amount of oil you will need. Simple.

After you have washed and cleaned the turkey – let it air dry- or you can use a towel to dry it – as it MUST be dry… not a good idea to mix oil and water. Season the turkey, place on the Turkey lifter and let rest. The turkey should be at room temp when you cook him. Use the syringe to pump melted butter into the breast, legs and thighs… or if you prefer- you can use an Italian salad dressing to pump into the turkey – think of it as a botox treatment… (makes it fun…)

Set up the fryer outside – AWAY from the house and away from the kids.

Dry the pot well and add the appropriate amount of oil and bring to a temperature of about 375 degrees. You should really get a good thermometer so you can get the temperatures right. Lower the turkey into the pot of very hot oil. The oil is going to splatter – So go slow. You need some very good cooking gloves.

Once the Turkey is in the oil, turn the heat up to get to a temperature of 350 degrees F. A deep-fried turkey cooks at a rate of about 3 to 3 1/2 minutes per pound. A ten-pound turkey should take 30-35 minutes.

Turn off the heat when done and slowly remove the turkey from the oil. Let the turkey drain a little bit and you’re set to go. Take in the house – carve and enjoy… you will be amazed at how NOT greasy or oily it is… rather it is crisp and juicy…

Buon Appetito