The US stock market sold off again with the S&P 500 -38.41, the Dow -509.72, the and Nasdaq -14.48. Also, the Asian markets fell overnight, and European markets dropped. The BEARS are running strong, and there is an increased fear of another recession.
The top S&P 500 sectors today were technology, utilities, and consumer staples. However, the worst-performing sectors were energy, materials, and industrials.
Energy traders should note that oil fell because Libya restarted crude production, increasing supply. Investors would be wise to watch oil prices as an indicator of the overall health of the economy.
Many readers have written in asking why is the stock market dropping. The short answer is uncertainty. Not to sound like a boorish professor, but the markets hate uncertainty because they don’t know where to place their bets.
Ok, great, now what is causing market uncertainty? – Politics.
Our focus at alphabetastock.com is to analyze the markets and report the news. We are not a political organization, but unfortunately, we are forced to report on politics as it relates to the markets, so please don’t take it personally or support a candidate.
BEARISH Stock Market Drivers
Supreme Court Battle: Although this is a purely political issue, it is bleeding out to the markets because of the uncertainty of putting a new person in place. A Trump pick would likely be more pro-business than a Biden pick. Trump is expected to announce his nominee Friday or Saturday. DC is already a circus, and it will probably get worse if Trump nominates a person. You can expect Democrats to do anything to stop the nomination but have said they don’t have many options.
Presidential Election: The polls are not transparent who will win the Presidential election. There appears to be conflicting numbers, and a winner may not be known until a week or more after the election because key states like Pennsylvania will wait for a least a week for mail-in ballots. This election is sounding a bad sequel to the “missing chads.”
Federal Reserve Mixed Signals: We have heard different opinions from fed officials for the last couple of weeks. At this point, we don’t know if the Fed will continue a Dovish and intervention stance on the markets or watch. Will we see another Fed bailout?
Coronavirus Resurgence: A majority of the coronavirus numbers are declining. However, there is a new fear that there could be a resurgence. Most states are open or in the process of opening their economies with a few exceptions like New York that don’t appear to be returning to “normal” soon.
Congress Stimulus Package II: Given Trump’s intention to nominate a new Supreme Court Justice, we don’t expect Nancy Pelosi and the Democrats to agree to any more bailouts. The markets had priced this in, and it is now doubtful to happen.
Government Budget & Shutdown: Congress and the White House were close to a budget deal to stop the Federal Government’s shutdown. The Supreme Court fight will likely cause a complete shutdown of the government. There is a small chance that Democrats will not fight Trump on this because they will not want to appear as the ones responsible for the shutdown, but I think there is more pressure on them to stop Trump’s nomination than win the election.
There are 42 days before the election. Every time we don’t think it could get more crazy, it does. Investors need to understand that this “uncertainty” will pass. When we don’t know, but it will pass.