Stock's Hammered

Macro Perspectives: Fri 4 Sept 2020

Stocks were hammered today, following the 64% run off of the March 23rd lows - a significant move in a little more than five months.

We also had the biggest move in the VIX since June 11, when the media sent the country into a stir about a second wave. This spike in the chart represents money managers scrambling to buy downside protection in stocks.

Is this in anticipation of the jobs number today? The employment report is expected to show 1.4 million new jobs added in August. The ADP report on Wednesday came in at just 428k. The market was expecting 1.17 million. As you can see in the payrolls chart below, there is a lot of ground to make up...

Over the past three months, we've made up nearly half of the jobs lost in April and May, with big positive surprises in each of the monthly reports. We'll see if the trend continues.

Meanwhile, the bookmakers have Trump now at a dead heat with Biden. That's a big swing from mid August, where a Reuters report says that Trump had "the lowest odds for re-election of any sitting President in history."

What does an increased likelihood of a Trump re-election look like for stocks at the moment? I suspect it would mean a broad opening of the economy and it would certainly mean a continuation of Trump economic policies, which is a sell signal for the "stay at home" stocks that have been soaring, and for the contra-oil proxy (i.e. Tesla). Those stocks were all beaten up yesterday, many down between 5 and 10 percent. Tesla is down around 20% since Wednesday morning.

Meanwhile, the cruise lines, airlines and oil and gas stocks outperformed. Is this the Trump trade: swap the "stay at home" stocks for the "return to normal" stocks?"