US Election Day: Biden or Trump?

Hi there, my name is Anthony Cheung. I'm the head of market analysis here at Amplify Trading. Don't forget to subscribe to the channel to get daily content from myself and the rest of the team. And if there's any questions about today's briefing, feel free to leave a comment below. Okay, very good morning. The day has arrived, of course, US election day, Tuesday the 3rd of November. So I hope you're feeling well rested and hopefully you can join us on Amplify Live. The link is in the description if you're watching this on YouTube to access a free trial so that you can join myself and the rest of the team throughout the evening and overnight session today. But looking at the charts this morning and equity index futures generally positive, the DAX up about 114 as European equity markets just about to open shortly. Follows on from the higher close that we had on Wall Street last night, uh, gains ranging from really around 0.3% up to 1.6%. And actually, a little bit of an unusual move in the sense that the NASDAQ was an underperformer, and we did see an apparent slight shift in rotation out of some of those big mega-cap tech names, uh, and that was reflective in the percentage changes of the individual stock sectors yesterday. I'll talk about that in a little bit more detail interesting commentary coming out of JP Morgan that kind of touches upon that idea of stock rotation as we go into the US election. Otherwise then, overnight a positive Asia-Pacific session following on, taking the baton from the higher close on Wall Street, and that's kind of led us to where we are at the moment. So with stock futures holding up, then T-notes are lower. We're down to around the bottom end of the range, really going back to where we were on Friday night session before the weekly close. But before there, we've got the low that we had in yesterday's session, around this time yesterday in fact, and that does coincide with the S1 in the US 10-year futures market down at the bottom right here at around 0.04, just holding some of the price action for now. Otherwise, elsewhere, the dollar is weakening. Uh, the DXY is down about 0.3%. It was grinding down through the Asia-Pacific session and it's just kind kind of added a bit further momentum to the downside as European and UK traders have come in. So subsequently, that is providing some underlying support for both major currency pairs, with EURUSD and CAD both up roughly around 40 pips or so. The euro having got above quite a key area yesterday, which did provide a kind of area of resistance to price recovery that we saw through the European morning before we sold back off through the US session. So having broken through that during the Asia-Pacific session, the euro has just kind of kicked on as the dollar has continued to weaken. Then in cable, we're just coming up to the top end of, of what has been a bit of a range of price activity of late, and just keeping an eye on the high from yesterday afternoon, which is where we're trading at the moment, around 1.2950 in the sterling-dollar futures. Oil markets down here at the bottom, phenomenal day yesterday, really. Actually, it is a 10% gain from lows to high, which is quite incredible in an intraday move. Um, but one of the things to keep in mind is we're just drifting off a little bit. Um, I don't think that's that unsurprising to see a little bit of short-term profit taking just going into the main event later. But underpinned here again by the commitment from apparent Russian inside sources suggesting about rolling over their current depths of supply cut from the OPEC+ side going from the end of January out through to the end of Q1. So if you like, kind of intonating of intervention to offset what has been a downward-moving crude oil market of late, with the general perception of demand destruction given the worldwide lockdowns that have been implemented that we've seen over mainland Europe, UK, and elsewhere. Going forward. So we'll touch upon that again in a little bit more detail in a moment, but let's get into some of the headlines. I'm going to start off with this idea I talked briefly about, um, the, uh, the JPMorgan note that was talking about potential stock rotation. So JPMorgan strategists are dropping their lifetime preference for technology stocks— this was yesterday— after being overweight for tech for almost 2 years, they raised their recommendation on banking and insurance stocks to overweight. The rotation in market leadership would stem from economic recovery and possible positive news on the pandemic. So all I can derive from that then is they're looking at the period— I mean, these calls, as I say, with tech, they've been in it for 2 years. So this is looking about the fact that, I guess, if we go beyond into then Q1, Q2, second half of 2021, We also, whatever the outcome, remove a lot of the risk or uncertainty surrounding about the outcome of the election. So we go beyond the next coming days and weeks. Then they're looking for a bit of a rotation then out of what has been a massively outperforming sector into something that then starts to show a further underlying economic recovery story. So a clear outcome for the election, they do say, is a positive for equity investors as the market could then focus on fiscal stimulus measures. So that's obviously one of the key things which we'll be watching tonight, is not just who wins the presidency between Biden and Trump, but more importantly almost is what is the composition of the, of Congress. Can the Democrats indeed conduct a full blue wave and take control of the Senate away from the Republicans? Again, how mixed or not that composition is of power on Capitol Hill will really define about the timing and the size of the likely stimulus that would follow. A contested result, according to JP, would lead to selling, they say, while recommending buying any weakness on a 3 to 6 month horizon. Again, looking at— generally speaking, it will be the uncertainty from an inconclusive election will likely be reflected short term in a negative way But then over the medium term, likelihood is that the market will move in a much more positive fashion. On this note, just talking about a couple of election scenarios. This was a chart I'll share with you, or crib sheet if you want to call it that, from Michael Brown. Michael kindly joined us on Friday for the live webinar that we did. But he's put out just a nice straightforward, kind of more binary outcome of blue wave, blue divided Congress, the status quo, or a red wave, and then the subsequent movement that can happen in the dollar, equities, and Treasury yields. So I'll share this around, I'll tweet it as well. My handle's here. I'll be tweeting useful infographics and stuff throughout the entire day and night, so anything at all, just, just drop me a line. But I won't go into this in great details, but worth having a review just in regard to the overall takeaways. From a summary point, blue wave or divided blue Congress, this would be a Biden win in a sense, but then how, how definitive is the Democratic win over the chambers? Then either of those are seen as the dollar negative, and I would agree with that in the short term. The idea then being that significant fiscal expansion is obviously going to increase the the deficit situation in America is the general notion of the most dollar negative under a blue wave. But that spending in itself, although they might talk about taxes, regulation changes, things that are more targeting the big tech names in particular, could be quite interesting on a sector basis. But overall, after that period, then the general size of the fiscal boost should lift equity markets. And interestingly, If you look at this, there's only— with the dollar, most scenarios are potentially for a weaker dollar apart from the status quo, where status quo means that Trump can continue his kind of tough protectionist stance. So geopolitical uncertainty continues, the dollar still kind of acts in a safe haven bid. With equities though, it's almost the reverse of the dollar, being that a blue wave, a blue divided Congress, or a red wave then stocks go up. And that kind of almost a joke at the moment amongst the traders is that the stocks just go up regardless, and they're not too wrong in that respect. So yeah, worth checking that out when you, when you get time. Um, on that point then, let's have a quick look at an update on what the situation is from an election polling perspective going into the final few hours. And on a national level, Biden still leads by a fairly comfortable margin The betting markets haven't really moved at all of recent weeks. They're still remaining around 63 in favor of Biden. This, as you can see, Trump has made a decent bit of headway over the last week. And probably more telling is the top battleground area. So Wisconsin, Michigan, where you've probably seen pictures, of course, of Trump physically holding these, these campaign rallies. It's going to be definitely interesting, you know, when you, when you put the election aside, the COVID-19 situation in America at the moment is looking fairly precarious, and I do feel somewhat that any type of more kind of forcible response to containment and of the spreading and transmission of coronavirus is kind of being somewhat pushed to the sidelines given the fact that He doesn't— definitely Trump doesn't want to be doing that or putting pressure on state governors this close into an election. So if that then allows— well, what I'm interested to see post-election, the COVID-19 to have spread. He's obviously been holding these big rallies. There has been before some kind of peaks in localized areas when this has happened before on mass gatherings. But also as well, is there a potential, given it's a highly contentious election that we're looking at, particularly from a lot of social issues, whether or not we're going to get a lot of rioting across the country, for example. And again, that can lead to situations obviously of a lack of adherence to social distancing measures and so on, which is obviously going into what is already a fairly increasing number of cases in America, particularly in those midwest, midwest Midwest states. So a couple things to think about. Overall though, the lead for Biden has continued to narrow. So Trump over the last really 2 weeks has done a pretty much the best job he can in order to narrow this down from what was kind of a 6 percentage point lead to now less than 3. He currently leads overall on an average basis in North Carolina. Florida is the kind of big one. Biden leads in the polls, but actually at ookies, that Trump is still leading with Florida. And Florida will be one of the key ones because, as you remember from my previous briefings, that is an area of which was one of the earliest, back into late September, had already started the tabulation process of counting mail-in ballot votes. So they should be one to release results in a fairly prompt fashion. And on that point, here is a a map of America and it's broken down. You can see that the brackets is, is UK time. So here, if you just— I'll again, I'll be tweeting all of this stuff, but if you scroll your— basically, if you scroll your mouse over each individual time, so midnight is when Florida is expected to come out. And Florida for me is a massive one, and so midnight is going to be a really pivotal point if you're trading the event overnight. We then go further forward and you go 7:30, 8:00, you get a bulk of them coming at 1:00 and then 8:30, which is again 1:00 AM, 1:30, 2:00. So by 2:00 AM you're going to have a pretty good sense with most of the big guns having reported by then. Again, a very top level As you can see here, at midnight and 12:30, you do get a number by 1 AM of the key swing states that come out. So it's going to be, it's going to be one of those where if you're new to trading, I'd say perhaps best just observing unless there's something absolutely clear that comes out. I'd say without really a squawk or an analyst team or some someone like myself assisting you throughout the night, you know, just be careful because it's quite— it's going to be really whippy price action. The way of which the American broadcasters release results is particularly messy because they don't always wait for a final outcome like we would in traditional UK politics. They report numbers as they're being counted, and so that they can shift one way into the other as they're being counted, which can cause all kind of, um, lack of follow-through in initial price movement. But timing-wise, we'll be going live on Amplify Live probably around 10:30, 11 PM, just in good time in preparation for everything that's going to come out. Okay, finally then, the calendar for today. Um, we have had the RBA interest rate decision overnight, so just to get you up to speed They lowered their key interest rate as expected from 0.25% to 0.1%, but that was very much as expected. The board also said they'll buy $100 billion Aussie dollars of government bonds with maturities around 5 to 10 years over the next 6 months. And Governor Lowe noted the RBA has not run out of firepower, but also pushed back against the prospect of negative interest rates. Overall, the Aussie, not too much in the way of a real sustained reaction did initially, in terms of price movement, we did initially dip overnight, but it's bounced from around its pivot level. We're actually trading up now, higher on the session, up about 19 pips. But I'd say predominantly that reversal underpinned by what has been some weakening in the dollar of late. Again, dollar weakness, why is that happening? Well, the, the market is still expecting at this point, on balance here, a Biden victory in and perhaps even a blue wave, which would be the most dollar-negative scenario. And so I think the dollar weakness is a reflection of that at the moment. So the RBA, not too much unsurprising, definitely policy action being taken of a more stimulative nature. But this is what we were anticipating. The other thing then on the calendar was to have a look at was the UK European session very quiet. We then go into the US, we've got factory orders at 3 o'clock, ISM New York Index as well coming out just before that, durable goods, but these revisions. So overall it is quite a quiet day and probably even likely to be more so barring anything unexpected, given the fact that a lot of people are just waiting now for the main event to kick off later on today. So that's it, gonna leave it at that. I'm gonna wish you guys a good day and I'll Hopefully I'll see you online later on this evening, uh, and yeah, looking forward to it.