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Stocks in ‘election-sensitive’ sectors seem oblivious to which candidate wins. Why?



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The stock market is marching to its own drummer. And neither Trump nor Biden is setting the beat.

President Trump’s policies toward business and Joe Biden’s platform on taxes, regulation, and the like make it pretty clear that some sectors would fare better over the next four years if Trump is reelected, and others would prosper more under the former Vice President. So you’d think the prices of stocks in Trump-friendly industries would surge when he pulls closer to Biden in the polls and sell off when he falls farther behind. By the same token, it would make sense that as Biden’s lead widens, as it has recently, shares in the corridors of the economy his proposals favor would follow the same pattern.

Of course, the trajectory of stocks in different industries are influenced by many forces besides the shifting odds of a Trump or Biden presidency. Among them are the Fed’s commitment to ultralow rates, the careening course of crude oil prices, and the mounting trade war with China. But according to Tom Hainlin, national investment strategist at U.S. Bank, the two paramount drivers of both the overall market and shares in different industries, are the ebb and flow of the pandemic and the probability that Congress will pass a new stimulus. “The markets are carefully watching the progress on a vaccine, that’s the key to fully reopening the economy, and the chances of a stimulus package as a bridge to get us there,” says Hainlin.

Still, the two candidates pledge to treat the same sectors in such totally different ways, that it’s worth exploring whether their fluctuating fortunes in the polls is part of what’s pushing and pulling stock prices. To find out, I looked at what’s been happening in six industries: three that should welcome a Trump presidency and three that would benefit from Biden’s proposals.

The three Trump-leaning categories are energy, health care, and technology. In energy, Trump’s been a champion of fracking and new pipelines, while Biden backs a climate-friendly agenda that could hurt oil companies. In health care, Trump’s changes in how insurers are reimbursed for drug sales looks like less burdensome than Biden’s stance for imposing price controls. And Biden’s plans for a broader public option could shrink the share of health care dollars going to private providers from insurers to HMOs. Tech is a close call. Both candidates talk about hitting social media giants with tighter regulation, but it’s likely that a Biden administration would take much more aggressive antitrust action, since Democrats regularly blast Big Tech for exerting and abusing their supposed monopoly power.

Leading the better-under-Biden roster are industrials and materials. Those sectors depend heavily on exports, and they’re suffering from the tariffs our trading partners levy in retaliation for the duties imposed by Trump. Biden is a globalist who supported the TPP and NAFTA. His policies would boost trade and lift growth for nations that buy our products, expanding overseas markets for U.S. steel, aluminum, and cars. The Biden green agenda would marshal huge subsidies for renewables such as solar, wind, and breakthrough battery technologies.

Since early April, the Trump vs. Biden polls displayed four cycles where Biden’s lead has significantly shrunk or expanded. We’ll call those episodes the Four Waves. In Wave One, running from Friday, April 3, to Friday, May 8, Biden’s lead shrank by 1.5 points to 4.4%. During Wave Two, from May 8 to June 19, Biden gained 5.1 points. In Wave Three, from June 19 to Sept. 18, Trump rebounded by 3.3 points, lowering Biden’s lead to 6.2 points, 49.3% to 43.1%. In Wave Four, from Sept. 18 to Oct. 14, Biden roared back, grabbing 3 points and establishing his current big lead of 9.2 points, 51.4% to 42.2%. Did stock prices in these six industries––all that could have plenty riding on the outcome of the election––follow the candidates’ zigzagging odds?

We’ll use the S&P industry indexes to measure the changes in five sectors and the Nasdaq Clean Edge Clean Energy benchmark for renewables. First up is the trio Trump should benefit. In tech, prices rose 15% in Wave One as Trump’s numbers improved. That seems to make sense. But in Wave Two, Trump fell far behind, and the sector did even better, waxing by 22%. Same story in the most recent four weeks of Wave Four: Trump slipped badly, and tech jumped 10.8%. The conclusion: Tech did even better when its best candidate’s poll numbers did the worst. Tech investors are yawning about the election and rejoicing over the 5G and other next-gen products they’re betting will drive today’s immense valuations to new heights.

Health care barely budged when Trump took his biggest hit in Wave Two, edging up 1%. When the gap expanded to its widest level in Wave Four, the index rose 2.3%. So the industry doesn’t seem the least bothered by the increasing probability of a Biden win.

Energy is the only sector where prices track Trump’s ups and downs. When the President’s numbers improved in Wave One, the S&P 500 Energy index rose 21%, and when his deficit expanded in Wave Four, the oil-gas-and-pipeline complex retreated 8%.

Let’s move to sectors that should be getting a Biden bump, at least in theory. When Biden got his biggest boost in Wave Two, materials went the other way, falling 6%. When the former Veep’s lead went from strong to overwhelming in Wave Four, materials rose just 1%.

As for industrials, over the two periods where the Biden lead shrank, prices increased 12% and 14%, and the two times he slipped, shares advanced 9% and 27%. Put simply, investors piling into industrials reckoned they’d thrive with either Trump or Biden in the White House.

Most mystifying of all is the reaction in green stocks. The Nasdaq Clean Edge index jumped 28% and 42%, respectively, when Trump made his best showings in Waves One and Three. Nothing against Biden: Green also gained 22% when he leaped to his widest lead in Wave Four.

The takeaway: Stocks that should benefit from a Biden presidency do no better when his polls improve than when Trump pulls closer. Of the three sectors that got a boost under the Trump presidency and risk losing that lift if he loses, only energy even remotely mirrors Trump’s prospects for reelection.

Stocks in what should be the “election-sensitive” sectors seem oblivious to which candidate wins. The narrative extends to the overall market. Biden’s proposal to raise the corporate income and capital gains rates appears to be a prescription for lowering future profits and compressing P/E multiples, how much folks and funds will pay for each dollar of those earnings. But that’s not the message the S&P 500 is sending. When Biden’s lead rose by 5.1 points in Wave Two, the S&P gained 5.7% and added another 5% in Wave Four when the chasm expanded to today’s 9.2 points.

Hainlin notes that “it isn’t unusual at all” in the run-up to a presidential election for the upfront and tangible forces that can benefit or damage businesses right now to outweigh the candidates’ positions in the minds of investors. And what’s uppermost in the minds of investors is the daily news on the the pandemic and wrangling over a new stimulus.

History also tells us that what’s proposed during a campaign often isn’t enacted. “Even if you get a Democratic sweep, it will take a long time to formulate policy and pass something,” says Hainlin. “And neither party is monolithic. For example, both Democrats and Republicans want to bring down drug prices, though in different way.” A good example of why the pandemic and stimulus are exerting a far stronger pull than possible future shifts in policy, he says, is energy. With crude oil in plentiful supply, it’s tepid global demand that’s holding prices in the $40 a barrel range. “A big Democratic victory would mean more alternative energy,” says Hainlin. “But what investors are looking for right now is the progress towards reopening that would lift demand and push up prices.”

The market is in such a party mood, so high on momentum, that it doesn’t seem to care who gets elected President. It’s been a bash. The looming policies investors are ignoring could bring a long hangover.

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The Dow has fallen 7% in the past 9 days. Is that a bad sign for Trump?



On the face of it, markets tumbling less than a week before the election doesn’t look like a good thing.

The Dow has fallen over 7% in the past nine trading days, with Nov. 3 just around the corner (the S&P 500 has followed suit, dropping roughly 6%). While spiking coronavirus cases and a lack of a stimulus deal are certainly driving some investor angst, does a pre-Election Day sell-off bode ill for Trump’s re-election?

“All else equal, a weaker stock market could certainly help Biden,” LPL’s Jeff Buchbinder tells Fortune. “On the margin [it’s] a little bit worse for President Trump based on history.”

Though pre-election drops of this magnitude aren’t unheard of, they are rare. The S&P 500 and Dow both fell over 3% on Wednesday, and according to LPL’s Ryan Detrick, “Only twice did the S&P 500 fall 3% or more within 6 trading sessions of the presidential election. 1932 and 2008. The incumbent party lost both times,” he wrote in a tweet Wednesday.

Detrick adds, “before [the] 2016 [election], the Dow fell 9 days in a row and the incumbent party obviously lost, so that time played out poorly for the party in power,” he told Fortune via email.

What perhaps has stronger historical precedent is a slightly longer time horizon: Buchbinder notes that in 20 out of the past 23 elections, it boded well for the incumbent when the S&P 500 was up three months before the election, while stocks trading down tended to favor the challenger. Stocks have traded roughly flat since three months ago, but turned lower on Wednesday: The Dow is down around 0.5% since August 3, while the S&P 500 is trading about 0.7% lower.

“Maybe from that perspective you could call it a mixed bag” for Trump, Buchbinder says, though the now-negative three-month trend would suggest a Biden victory.

Buchbinder points out that “stocks that tend to be favored more by Democrats than Republicans continue to do pretty well on a relative basis, potentially signaling Biden.”

Indeed, according to a recent J.P. Morgan report, stocks in a so-called “Biden basket” (names that would do well under his administration) are outperforming those in a “Trump basket” by around 66% since December 2019. “Recently markets have been saying, ‘Biden’s the favorite,’ but we’ll see where it goes from here,” LPL’s Buchbinder adds.  

Still, some argue that the contest between the two candidates is closer than pollsters and perhaps even markets had anticipated in recent weeks: According to some A.I. analysis, the race is tight, and Buchbinder notes “we could get more volatility if the polls tighten and more people start to worry about a contested outcome—that’s something to watch.”

To be sure, there’s hardly anything typical about this year, and some historical patterns have been broken (as a small example, Oct. 28 is historically the best day of the year for stocks—a trend that certainly hasn’t held up in 2020).

Despite the recent selloff, continued virus worries, and overall investor angst, Buchbinder remains optimistic: “The combination of [future] stimulus, getting the pandemic under control and moving past it, and clarity on the election, we think, can push stocks higher between now and year-end and into 2021.”

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4 key moments from the Senate’s showdown with Big Tech CEOs



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For more than three hours on Wednesday, Democrat and Republican senators took jabs at Facebook, Twitter, and Google, saying that they disseminate misinformation, spark violence, and suppress conservative voices.

The Senate Committee on Commerce, Science, and Transportation explored whether Section 230, a law that protects Internet companies from being held liable for what users post, gives Big Tech companies too much immunity. Lawmakers from both parties agree that the law should be changed or even revoked, though they differ about why.

Democrats repeatedly criticized the companies for failing to remove harmful information on their services. Meanwhile, Republicans hammered the companies for allegedly suppressing conservative views and influencing elections.

“You think that people don’t trust you,” said Sen. Ron Johnson, a Republican from Wisconsin. “I agree with that. We don’t trust you.”

Facebook CEO Mark Zuckerberg, Alphabet CEO Sundar Pichai, and Twitter CEO Jack Dorsey spent the hearing trying to defend themselves from the attacks. Time and again, they said they’re at war against harmful content, that they are politically neutral, and that they’re working to safeguard the presidential election.

Here are the highlights from the hearing:

Heated exchanges

The hearing was marked by intense exchanges between lawmakers expressing their frustration and executives trying to be as inoffensive as possible.

Sen. Cory Gardner, a Colorado Republican, took Dorsey to task for allowing Iran’s Ayatollah Ali Khamenei tweets questioning the Holocaust to remain untouched on Twitter while the service routinely flags President Trump’s tweets. 

Republican Texas Sen. Ted Cruz criticized Twitter for blocking a New York Post article that suggested Biden had ties to corruption in the Ukraine while allowing a New York Times story about Trump’s taxes to remain. One day after the Post article about Biden was published, Twitter reversed its stance on blocking it. But Cruz also asked Dorsey point-blank whether Twitter has the ability to influence elections.

Dorsey responded by saying, “No, we are one part of a spectrum of communication channels people have.” Cruz snapped back, “Mr. Dorsey, I find your opening answers absurd on their face.”

Democratic Sen. Amy Klobuchar, from Minnesota, said she was concerned about Google’s “defiant” response to the Justice Department’s antitrust lawsuit against it. She also questioned Zuckerberg about Facebook’s alleged interest in pushing divisive content to users because it provokes them to spend more time on the platform. 

Zuckerberg disagreed with Klobuchar’s characterization, saying Facebook shows users content that it thinks will be meaningful to them like “when your cousin had her baby.” Klobuchar stopped Zuckerberg mid-sentence, saying she’s not talking about cousins and babies but rather the “corrosive” content like conspiracy theories. 

Beyond Section 230

Though the hearing was supposed to focus on Section 230, senators often veered off topic to discuss other issues including data privacy, antitrust, and political ads.

The CEOs of Twitter, Google, and Facebook all said they continue to see foreign and domestic actors trying to interfere with the U.S. election, contrary to President Trump’s minimizing or dismissing the problem. The CEOs added that they have coordinated with the rest of the tech industry and law enforcement to identify and remove such posts. 

“One of the threats the FBI has alerted our companies and the public to was the possibility of a hack-and-leak operation in the days or weeks leading up to this election,” Zuckerberg said. “That if a trove of documents appeared, that we should view that with suspicion that it might be part of a foreign manipulation attempt.” 

Tech troubles

The virtual hearing about the tech industry ended up being marred by tech hiccups. Even the tech CEO had troubles.

Zuckerberg went AWOL from the opening statements because of a technical snafu that ended up delaying the hearing for a few minutes while the CEO tried to fix the problem. After Zuckerberg appeared, and explained he had trouble connecting, Sen. Roger Wicker, the Republican chairman of the committee, joked, “I know the feeling, Mr. Zuckerberg.”

Later, Democratic Sen. Richard Blumenthal’s audio was muted halfway through a sentence. Wicker alerted Blumenthal to the issue, and the hearing briefly paused until he was unmuted.

Low moments

Some lawmakers used the hearing to go off in odd tangents.

For example, Republican Sen. Marsha Blackburn of Tennessee asked Pichai if Google still employed software engineer Blake Lemoine. In leaked internal emails, the Google employee likened Blackburn to a “terrorist” and a “violent thug” in her approach to certain political issues. “He has had very unkind things to say about me,” said Blackburn, implying that he should be fired and later suggesting that Internet companies unfairly censor conservative voices.

In another odd moment, Sen. Johnson became frustrated with Dorsey because Twitter did not remove a tweet that contained a lie about Johnson strangling his neighbor’s dog. The author admitted in the tweet that the dog strangling was false, likely to show how misinformation can be spread.

“That could definitely impact my ability to get reelected,” he complained in complete seriousness about the tweet.

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