Biden Set For Victory But Congress Remains Divided Sending Tech Stocks Soaring

Hi there, my name is Anthony Cheung. I'm the head of market analysis here at Amplify Trading. If you would like to learn how to trade the Amplify way, then check out Amplify Live in the link below to access our latest on-demand training content. I'll see you in there. Okay, very good morning to you, Thursday the 5th of November. Hope everyone's recovered now from the election night. Thank you to everyone again who is joining us live on Amplify Live. Great to have you on board throughout. But just having a look then at markets this morning and really going to kick things off looking at the scoreboard from last night, which is the close on Wall Street. And what a phenomenal close it was, particularly for the large mega-cap tech names. The Nasdaq 100 yesterday finishing up about 4.4%. And as you can see here, Some of these biggest blocks, familiar names of course. The big outperformer Facebook up over 8%, Amazon 6.3%, Google 6%, Microsoft 4.8%, and Apple 4.1%. So some monster gains again from these companies. And a little bit surprised actually, when I left my desk at around 6 AM the previous morning, when we kind of concluded our election at the time coverage. I was a little bit apprehensive, in fact, going into the European Open about how people would perceive quite a close-run race. The rationale being that I thought it hasn't been the blue wave that— and a Biden storming victory that some would have seen. The closer then it was going to be, the more contested legally it was like to be from Trump. I just thought that that longer, more protracted process might well cause a little bit of disruption to markets kind of just general psychology over being quite nervous. And the longer it would have taken to get an end result, perhaps then people would panic a little bit, particularly given how markets have been rallying up into the election on the notion of a Biden win. So that didn't happen, of course. And looking at what happened yesterday, I think it is fairly clear to see why what happened yesterday did happen now. If you think about Biden and a couple of things, what he means in terms of the trade war, just softening that kind of protectionist rhetoric out of the US, which is obviously very important for China but also other trade partners around the world, including Europe. Probably not being able to push through a tax hike, what, which was one of the things he wanted to do and would have been able to probably achieve much more effectively if he had a clean blue sweep, but that doesn't look like it's going to be the case. The Senate remaining Republican means that it's likely then there's not going to be any change on that front anytime soon. And then the chances of major legislation passing could be particularly slim, and that in itself is a good sign for many different industries, but in particular as well, no imminent tougher regulations around would be impeding the technology sector, particularly these prominent tech names like the ones I've just mentioned means that for them then it's a major risk or hurdle eliminated in the near term because of the split nature of Congress. And so they just rallied really sharply, uh, last night. So yeah, definitely was surprising. And you know, just looking at the charts this morning, I was just having a look on the NASDAQ, obviously up a sharp amount yesterday, but we're already up in the futures again. We've just taken out 12,000 now in the NASDAQ. So the continued recovery, uh, this is just looking then on a slightly longer time frame at a daily continuation chart. And I've just marked up here the Biden victory but split Congress being good for tech. And now we're at 12,000. Technically, um, you've got the high that was seen here back on the 16th, which was also the low on the 13th, and previous highs back going to the summer initial push to the all-time highs at the time. So quite an interesting level here at around 12,029 or so in the NASDAQ, but a break above that, then I don't see why we wouldn't have a quick run up then to the highs that we were seeing back in the mid part of October, which would be more around 12,172, 75 type area. So definitely, uh, an obstacle here resistance-wise, but breaking of that, then there could be potential for another decent push of upside here in the NASDAQ. Looking at the S&P, the S&P is trading at 3471 at the moment. But one thing I wanted to share was this. This will make Sam North particularly happy. And this is the call from Goldman Sachs. They basically said their cross-asset macro conference call that took place yesterday, obviously whilst this election outcome was becoming more visible in terms of the Biden victory. And they said the read across can be summarized as no change, nothing to see here, basically. So what they're suggesting then, and given the aforementioned reasons, uh, as I mentioned about the lack of kind of shackling Biden of what he could have done, you know, because even if you look at things like, um, oil prices yesterday rallying, oil majors also benefiting because the new administration would be restrained from enacting on some of its most ambitious proposals on things like climate proposals, for example. So all being equal, it just means then that they feel pretty bullish. They got a year-end call at 3,600, looking at a 12-month outlook at 3,800, uh, for the, for the S&P in terms of what Goldman's are expecting. This again was as of yesterday. All right, quick look across the other asset classes then. And in the FX market, the dollar's down just a touch, 0.1%. Euro-dollar and cable both up around a similar margin of about 10 to 15 pips. Cable, a little spike. We did have the Bank of England meeting just a short while ago, which I'll recap the details in a moment. And then elsewhere, T-notes also up about 7.5 ticks. So here is again An interesting thing I was talking to some of the traders about last night, in fact, which was trying to explain to them why there's a synchronized move here with bonds and stocks both moving higher with a weaker dollar, and therefore gold price also moving higher, up about $14 again, having surmounted $1,900 yesterday evening. And so the idea being here is that, again, back to the split nature of Congress, then the ability for the Democrats to push through immediate and very large-scale stimulus— remember, they were going for much larger than the Republicans were— the likelihood of that is now less likely because of the Senate being retained by the Republicans. And those— so therefore, just seeing a bit of a pullback in yields in the US, which is lifting fixed income, and consequently as well that lack of stimulus, just seeing the dollar ease off which is lifting then gold prices, given how inverse that relationship has been of late. So that's the, the kind of rationale behind what a lot of that cross-asset class movement was about. Otherwise, oil, it's backed off a little bit in the overnight Asia-Pacific session from where it was, with the recovery back above $39, which was a short-term range kind of high. So I'll be keeping back to on the futures chart, back to keeping an eye on 3883, which is around that kind of range high that was shackling some of the price activity, uh, back on Tuesday and was a little bit supportive as well for periods of the session yesterday. So any push back above there would be worth keeping an eye on. But if we continue to kind of fan the flames of the general sentiment from yesterday, could well be again a breakthrough that just grinding up higher in a similar fashion to the equity market. Okay, let's have a quick look then at a few things. And this is looking at then what is the current state of play. So as you've probably read overnight, it's pretty much wrapped up now that Joe Biden's going to win the election. And this is a far cry from where we were on the night, if you remember, those that joined us when Trump won Florida, then he started to pick up some of the other states in that kind of early-hour activity, it did look like Biden was looking like a bit of a flop, and Trump certainly did outperform comparative to polls by a sharp degree. But fast forward to where we are now, and the mathematical possibilities, as we'll discuss here, for Trump now are looking highly unlikely that he's going to come through. So Biden last night won Michigan and Wisconsin, and if anyone was following me on Twitter, you would have seen I was kind of running the numbers last night and sharing a few insights. And Michigan really is where it's at because in the current vote counts that have happened in the other states, you could almost dictate who was going to win what. The one on the, on the, on the fence was Michigan, and now that's gone to Biden. That's pretty much sealed it for him. He also then won Wisconsin. These are massively important battleground areas, uh, and again, that puts him on the brink now of getting the keys to the White House. Biden needs now to only win one more additional state such as Nevada, where he is leading currently, and he's over the line basically. If he wins Georgia, where his campaign believes absentee votes will push him over the top, then he's won. So here Biden can reach 270 by winning just that one additional state. And you can see here there's still a few to come in. Uh, so once again, Pennsylvania, very important, but given some of the flips that Biden has already done against what Clinton lost, particularly like Michigan and Wisconsin, he doesn't even need Pennsylvania now to get to that magic 270. And again, he's on 264 at the moment. And areas you know, like Georgia for example, uh, are pretty big on the Electoral College vote, and that will easily put him over the line. But even just Nevada, um, which accounts for, for 5 or so— I think it's 5 votes, perhaps it's more, in fact, well, what's yet to be called— will, will push him over the line. And then you've got, well, how can Trump win from here? Because no one's declared a victory just yet. And that's the reason behind that is that basically for Trump to win, not only does he have to win Pennsylvania here, um, he needs to, needs to basically secure North Carolina, Georgia, and Nevada, um, in order to get, get it through. So he's got to win all of the remaining battleground areas, uh, and it's not looking favorable for him given the, the current status with the counts at the moment that he's going to achieve that. That would then put him one vote over at 271 to Biden's 264 of where it resides at the moment. Trump's campaign has said that he is going to sue in Pennsylvania, Michigan to halt votes that have been trending toward Biden. Trump campaign has said it would demand a recount as well in Wisconsin. Not sure really what difference a contested legal battle from Trump is going to mean for financial markets. Because in, in my mind, everyone knows Trump has telegraphed this for some time, that he was going to challenge this outcome if it was going to be relatively close for Biden. And so I think if markets were nervous about that, then we'd already be selling off and not rallying right now. So I think the market's just jumping on this kind of split Congress Biden victory as for the positives we just discussed earlier, why we rallied yesterday. So all in all, I don't think there's a lot Trump can do really. And where he goes from here, who knows? I'm sure he'll sign a big book deal and have a TV show and make lots of money. So I don't think we need to worry too much about, about Donald taking care of himself in the future. Another interesting thing here to think about, though, is the US COVID situation. AFP has tweeted that US COVID-19 cases hit a new daily record topping 99,000 cases, citing Johns Hopkins University, while a major newswire tally noted U.S. cases rose by 105,000, which is by far the highest single-day increase, uh, that we've seen. Remember, going into the election, numbers were kind of stabilizing around 80,000. Some of these reports are jumping out to 105,000. And don't forget, there's a lot of physical in-person voting that were done during the election day in itself, as well as campaigning that was done last minute, particularly on the side of Trump in some of his physical campaign rallies. So one would think that number is going to get worse over the coming week and weeks. And now that we have Biden in the White House, it's going to be interesting to see what the general rhetoric is towards lockdowns. Now, an interesting point there, of course, is that although Biden has won, Donald Trump is still in the White House until the inauguration, which isn't going to come for a number of weeks. During that time, of course, COVID is going to get a lot worse. So really it's on Trump's watch still. Biden, of course, if I was tactical for Biden, I'd be putting a lot of pressure on Trump to kind of shut down to a certain degree parts of the economy just to make Trump look even worse. And so that any economic impact that that might have, well then that's on Trump's watch. When I come in, it's a fresh new start. Start, and you can start from a low base economically if the economic implications have already hit through more stringent restrictions implemented from Trump. Whether Trump wants to do that just to be a pain— I mean, there is obviously the, the cost of human life here on the line, but we know what politicians are like. So yeah, that's definitely something to keep an eye on because at the moment some kind of action needs to happen for COVID to be contained in the US for sure. The one big winners here are, you guessed it, these guys. The rich just get richer. Bezos, Amazon up 6% yesterday. I'm feeling quite bullish about them going forward, as well as the rest of the mega-cap tech names, not only because of the fact that there's no imminent now tougher regulations because Biden hasn't got the type of commanding control on Capitol Hill because of the Senate being Republican. But if we go into another period of lockdown in the US, well, then it's going to benefit these types of companies, which we have seen flourished under pandemic conditions, just given the way of which their, their companies are structured and the products and services in which they offer. Moving on then, I'm going to have a quick look at a few other things, and starting off with the Fed, because I'll go through Fed, then I'll move to the UK, the BoE, and Brexit. But with the Fed, we do have an FOMC meeting of course this evening, but it's going to be a non-event, so I don't really anticipate too much at all, to be quite honest. They're going to hold off any major changes in policy, unlikely to be much in the way of many hints or changes, anything of that nature, just given the fact that There's still a lot of uncertainties, of course, around the election. Still, things, though, have shown signs of deterioration economically, and I think that will cause an adjustment and a slight tweak in their statement to say that they're seeing new risks to the economic recovery as the virus picks up again. And particularly given the way that the virus is accelerating at this point in, in North America, Powell likely to reiterate that the central bank stands ready to do more to help the kind of sputtering US recovery at the moment. One thing to be aware of is that San Francisco President Mary Daly, who is of a neutral disposition from a monetary policy perspective, she isn't a voting member of the FOMC, but will vote in this meeting, taking the place of the Minneapolis Fed President Neel Kashkari, who will abstain from meeting following the birth earlier this week of his second child. That's pretty, pretty swift. I thought he only had his first child less than a year ago, so he's a braver man than me. Uh, Kashkari— but Kashkari is a dove. Uh, his, his interim replacement, Daly, is neutral. I don't think that really makes a great deal of difference because they're not in a position really to make any significant changes. So I don't think we need to talk about them or the FOMC for too much longer. We have had the Bank of England this morning, and you've probably witnessed the pound rocketing high on the back of this. And it's in a similar vein to what we've had of late, which is a kind of counterintuitive move to what would normally happen. A larger than expected boost to quantitative easing and an increase to money supply generally theoretically would weaken the currency, but quite the opposite— the pound has strengthened. Now, a lot of this thinking was similar to what we saw in the euro when we had the implementation of the European Recovery Fund back in May, when the ECB and Lagarde overdelivered on their PEP kind of pledge and their overall envelope well in excess of €1 trillion, euro's actually rallied. And so the pound's done a similar thing. Now, a lot of this is because economically we're in a very fragile, precarious situation. And so if they're throwing more at it, then it kind of alleviates then the apprehension, anxieties in the market. About the economic situation. So it's seen as a positive move when they overdeliver at this point, overriding then the underlying increase in, in money supply. So, um, another question I had is this was actually semi kind of leaked last night. So again, on Twitter, um, yeah, I don't tend to sleep these days. It's just 2020, there's too much going on in the markets, but but there was a leak in The Telegraph where pretty much this came out, and The Sun newspaper actually broke this. They were talking about the fact that they were going to go for 150, possibly 200. Someone did ask me in Amplify Live in our chat room, why would they do that? You know, why would they leak that so close to the actual event? And usually what happens then is that— remember, before every central bank major decision there's normally a 2-day meeting of the committee, in this case the Monetary Policy Committee, the MPC. Now, at the conclusion of those talks, that's when they'll put up their hand, they'll have a final vote then of what is the course of action from a policy perspective that they're going to take. And it probably would have been then a pretty lengthy discussion, and at the end they decided that given the fact that the UK has gone into now the most extreme lockdown we've had since the first wave back in, in kind of March, April, and things are getting worse at this point with COVID with the compounded negative possibility of a messy negotiation surrounding Brexit and increasing risk of no deal. Even if a deal, then the implications then for Q1 and beyond, they just felt like they needed to do more. And so what they do is they just call up the guy at The Sun, whichever newspaper, and then they'll drip-feed it in under sources, and that then prepares the market so it's not spooked and shocked when a piece of information comes out. Remember, the intention of a central bank is to mitigate volatility in markets. They want nice, controlled, orderly response to their policy changes and communications. So it's quite typical, uh, this type of activity here. The guy I was talking to also said to me, the sun, really? Yeah, I mean, absolutely. In my old job See, when I used to run an analyst desk, absolutely, I'd have to look at the Sun every morning and every day. You know, don't discount then a publication just because of its readership demographic, let's say, on socioeconomic status. I think you'd be wrong in thinking that news can come from anywhere. Yes, it comes more frequently from certain sources which are more aligned to talking about business and politics specifically. But even with the latter, The Sun is actually particularly good at that. And The Sun's main political editor will also be at all of the same meetings as would The Telegraph, The Times, and so on. So just, just be aware of that. Um, so that's the kind of BOE situation. A couple of comments that I thought were worth, uh, looking at. They kept rates unchanged, so that's very much as expected. No one— as much as there is so much talk about negative rates. We're not at that juncture just yet. For me, it's all about just talking about negative rates to get in the investor psyche that we're willing to do it, and it's an option, a credible one, on the table. I don't think they want to do it, but that's, that's part of the art of the forward guidance, I guess. They did say signs consumer spending has softened across high-frequency indicators. The outlook for the economy remains unusually uncertain. UK trade and GDP are also likely to be affected during an initial period of adjustment over the first half of next year given Brexit. They did downgrade then their GDP outlook as well with their latest monetary policy report, which also came out downgrading this year and looking for a more shallow type recovery going into 2021. Hence the reason why they over-delivered on the QE 150 against 100 expected. Talking of Brexit, where are we on this at the moment? EU-UK negotiators will make a further effort next week as talks have been paused as of yesterday before resuming next week. Now looking to hammer out differences where there are still apparent very serious divergences on all of the same things. Focus on getting fisheries level playing field breakthrough. They are still said to be the main sticking sticking points at this point in time. The two sides face an approximate mid-November deadline, of course, to broker an agreement in time for it to be ratified by Westminster and by European Parliament. Again, I see that as a semi-hard kind of deadline. The real tangible one, of course, is the legal one, which is the end of transition at the end of this year. So for me, I, I, I, I tend to think that these kind of deadlines that we've had, whether self-imposed like from Boris Johnson, that we've had mid-October, end of October, now it's mid-November. It's, it's strategic within any negotiation to have a near-term kind of target just to keep momentum behind discussions, but I really don't think there's much in the way of credibility. I mean, at the end of the day, if they need to then have an interim hold period of an extension of weeks, months, just to get it ratified, uh, both in the— in Westminster and in Brussels, I think that that's fine. So therefore, that would lead to the belief then that perhaps then striking a deal doesn't come to the last moment looking into December. I wouldn't be surprised by that at all. At the moment though, short term, markets don't really care about Brexit because of that timeline. It's not really a pressing issue right now, even though it will be in a period ahead, because right now the pound's jumped on the BOE and people are just digesting the dollar-led movement, which is still key, uh, given we're, we're still digesting the US election. The other thing worth a mention as well is Rishi Sunak, UK Chancellor, is going to come out and announce his new COVID-19 economic support for the whole UK today. This comes after the reintroduction of the furlough 80% funding scheme for companies' wages when following when England went into lockdown, and that's what's caused quite a big reaction generally in the political world against the government because furlough's only been reintroduced when England and the South, predominantly the Southeast, has gone into then full lockdown. Whereas as we know areas in the north and then other countries that comprise of the UK have already been in lockdown for some time and there was no forthcoming furlough, um, kind of commitment then. So Rishi's gonna face some challenging questions, I'm sure, but overall we know what the situation is there, so I don't think it's particularly market moving. Otherwise, wrapping up the other headlines of the morning, German factory orders rose for a 5th month in September. This is what that looks like for German manufacturing, seeing demand increasing for a 5th month. But as you can see, we had this massive catastrophic collapse in activity, as you would imagine, through then the first lockdown in the spring. You've had a massive comeback as we get reopening of the economies, and it's kind of all that pent-up demand that was lost over that period, whereas now it's been diminishing. And so for me, I think this is particularly important. Last Friday, the German Minister for the Economy said the government predicts the economy will contract by more than 5% this year. Another aid program worth €10 billion is already in the pipeline for companies shuttered by month-long and partial lockdowns in Germany. But for me, this number doesn't really matter. What matters now is about the future, and the future being the coming months, given the fact that we've already had in the last 2 weeks Germany has reintroduced quite strict lockdown measures. And not only that, factory orders— when we're talking about a country that exports goods, the rest of the world, or most of their main clients, whether that's in mainland Europe, UK, US, COVID is getting worse, likely requiring more restrictive measurements from their local governments or national governments. And so it's going to be challenging for Germany to keep this afloat, hence the reason why the government offering another €10 billion to assist in a similar fashion to the other mechanisms that the likes of the UK have done to help companies. All right, looking at the calendar for today, we've already had the Bank of England, of course, and the German data. So that's pretty much wrapped it up in terms of the key fixed things for this morning. Construction PMI is really a moot point, doesn't move the markets. Then going in, you European retail sales, not, not important either, so I wouldn't get too bogged down with that. And then we go into the US afternoon, and it's the final kind of job indicators going into non-farm tomorrow on Friday. So we get Challenger layoffs, initial jobless claims, 12:30 and 1:30. The initial jobless claims expected at 751,000 today. Then you've got the Fed in the evening, again largely to be a bit of a non-event. I'm sure I'll drop in on the Amplify Live chat at the time that comes out though, just to make sure, because you never know. Uh, and then ECB speakers really dominate, uh, on that side of things. 11:40, de Guindos, Weidmann at 3:00, Schnabel at 3:10, and then Fed Chair's, uh, press conference begins half an hour after initial statement release. Uh, so Powell will be up at 7:30. Uh, okay, so that is it. Any questions at all, feel free to just drop me a question in the comments and I'll be more than happy to help. Otherwise, have yourself a good day, and it's looking like we're going to have a new president in the White House. Well done, Joe Biden.