Jurrien Timmer, Director of Global Macro, provides his weekly global macro and markets update. Jurrien notes that the market needs fiscal stimulus to keep up the momentum created by the initial CARES Act. Otherwise, jobless claims will continue to rise, now that employers that previously benefited from the CARES Act are allowed to lay employees off. He believes there are two factors pushing the market today: the president’s condition is improving, and the market is more decisive in its expectations of a blue sweep. The betting odds on the Republicans winning are very low, and the numbers predicting a Democratic win accelerated following the debate on September 29. Historically, a blue sweep has produced below-average results for the stock market over the subsequent two years, presumably because of increased regulation and higher taxes. Today’s focus on massive fiscal stimulus, however, could override concerns about tax increases. The Democrats are also discussing an increase in personal income tax, which could result in tax harvesting. The consequences of this could include inflation and an increase in the money supply, or a rotation from growth to value (especially if tech stocks receive more scrutiny under a Democratic administration).

Recorded on October 5, 2020.