Safe Harbor? VIX Agree's...

Macro Perspectives: Wed 9 Dec 2020

The negotiations continue over a second Covid relief package.

While both sides have shown optimism in getting a deal done, it seems like "smaller" is the likely outcome. McConnell seems to be dug in and confident that the Democrats are coming to his number, which won't include state and local government money.

With that, the stock market has probably priced in another half-a-trillion dollar bridge to get consumers and small businesses through the next few months.

Meanwhile, yesterday was the 'Safe Harbor' deadline for the election. This is the final day to resolve election disputes, assuming the Electoral College would vote six days from now. The election challenges have now (as of Tuesday 8 Dec) been elevated to the Federal Supreme Court - one from Pennsylvania republicans, and the other, a lawsuit filed by the state of Texas, attempting to delay the Electoral College voteand prevent four states (Georgia, Michigan, Pennsylvania and Wisconsin) from casting their Electoral College votes for Biden.

This is an event that markets have been ignoring and assigning virtually zero risk to. The chances of an election overturn at the Federal Supreme Court may not be high, but it's not zero.

Meanwhile, the VIX (and VOLI) end the day near January highs.