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U.S. Election May Offer Opportunity To Buy Stocks At Better Levels

Fullerton Markets

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Stock futures fell amid rising concerns over the increasing number of Covid-19 cases. The losses came as England adopted a stay-at-home order and as traders braced for Tuesday’s U.S. presidential election, where a contested fight for president or the Senate could delay a much-needed fiscal stimulus for the U.S. economy.

The Dow just closed out October with a 4.6% loss last week, marking its worst monthly performance since March. The S&P 500 and the Nasdaq fell 2.8% and 2.3% last month, respectively, both suffering their second straight negative month.

In Europe, Prime Minister Boris Johnson announced Saturday England is closing all nonessential businesses for the next four weeks after more than 22,600 weekly Covid-19 cases were reported in the U.K., far higher than its first peak of 4,800 average weekly cases in the spring. People will be ordered to stay at home unless it’s for essential purposes, Johnson said.

The U.S. is also grappling with rising new coronavirus infections. The nation reported 99,321 new Covid-19 cases on Friday, beating its previous record set only a day prior, according to Johns Hopkins University. The top five records in daily cases have all been reported within the last eight days.

Ahead of Tuesday’s election, Joe Biden holds a substantial national lead over President Donald Trump. The former vice president garnered 52% of support from registered voters versus 42% for the president, according to an NBC News/Wall Street Journal poll from Sunday.

The Senate election could also be crucial for the markets as many key policy shifts including further fiscal stimulus hinge on who holds the majority control. The world is still largely in a holding pattern as investors await clarity on the U.S. election, it will likely be a lot clearer in just a few days after the election being over, stimulus talks resuming in Washington, further central bank support.

Volatility spiked to a four-month high during last week’s stock rout. The Cboe Volatility Index (VIX), also known as the market’s fear gauge, jumped above 40 briefly. Some on Wall Street believe the sell-off leading up to Election Day gives the market less downside risk to a contested result.

Even though investors are worried that there could still be one more wave down if we get another big influx of uncertainty, some traders think the stock market is now setting up nicely for a nice net advance over the next two months or so. Apart from the election, investors are faced with other key events later this week, including a Federal Reserve policy meeting and October’s jobs report.

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