Market Recon (Election Day)

Good Morning,
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Election Day.
                  It’s both your right, and your privilege to participate in the process. How you express your viewpoint on national direction is one thing. Adapting to, and excelling in an ever-evolving marketplace is another. The equity markets came very close in just one day to pricing everything back in that was priced out over the nine day losing streak. Not everything was put back in it’s place the same way, and it is possible to learn from that. Today, we’ll touch on three specifics.
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US Dollar Valuations.
                   On the day Director Comey announced that the FBI was taking another look at Sec. Clinton’s e-mail case, the DXY had been trading between 98.75, and 99 for a few sessions. Yesterday, the DXY rallied all the way up to the high 97’s. If you believe that a victory by the Democratic nominee keeps the FOMC on track, and thus strengthens the US Dollar vs. it’s competitors, then it stands to reason that there is trouble on the horizon, for Treasuries, Gold, and ultimately multi-national Corporate earnings. You can also throw WTI Crude in that group, just not yet, as there are too many external factors impacting that commodity. Currency exchange rates will be just as important a factor to forward looking market performance as interest rates, and they’ll walk hand in hand.
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The Financial Sector.
                   Take a look at a sector heat-map. Go back one day, go back five days. thirty days, ninety days. Only one sector comes up green in all of those maps, and that’s the Financials. Again, an election outcome that keeps the monetary narrative in place is perceived by the trading public as a positive for banks, consumer finance, and capital markets. Performance is what you need for an investment. All you need for a trade is perception.  Throw in a some consumer level inflation over the first half of 2017, and this will remain an out-performing group for that time frame.
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The Healthcare Sector.
                   A lot of folks don’t know what to make of this space. Drug makers attacked from the left. The Affordable Care Act attacked from the right. This sector struggled over the last month plus as political pundits considered a Democratic sweep. The when the top of that ticket hit a bump in the road, and the Republican nominee gained a lot of ground in the race, this sector struggled more. There was even some talk last week (not in the media, but within the business) of a possible Republican sweep. Both of those outcomes could/would be awful for parts of this sector. Yesterday, one of the biggest reliefs of that relief rally was in the Healthcare space. The expectation is now for more gridlock in Washington. Likely, traders will deal with a lot of rhetoric, but little action. The Drug makers go about their business. Ordinary Americans keep paying higher premiums, and deductibles as the Affordable Care Act underperforms. Bills get paid on time. What’s good for health care, and what’s good for the Health Care sector don’t always jive. This sector wins in a gridlock scenario.
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Macro
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06:00 – NFIB Small Business Optimism Index (October): Expecting 94.2, September 94.1. Small Business Optimism has been trending slightly lower over the last couple of months, but was still higher in September than it was over the first half of the year. Key to this report will be Plans to Make Capital Outlays, and Current Job Openings, bot of which are coming off of abysmal prints.
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07:45 – Fed Speaker: Chicago Fed Pres. Charles Evans will speak on monetary policy, and economic conditions from New York City. Evans, who will be a voting member of the FOMC next year, will participate in a Q&A session.
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08:55 – Redbook (Weekly): Last week 0.6% y/y. As always, a year over year number in the 0.5% range keeps this weekly number under the radar.
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10:00 – JOLTS (September): Expecting 5.45M, August 5.44M openings. Job Openings printed at their lowest level for August since the January release. Today’s expectation is for a return to a number closer to the trend. This item is not closely looked at, and will not move the marketplace.
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12:45 – Fed Speaker: Chicago Fed Pres. Charles Evans will speak from New York City for the second time today, and speak publicly for the third time in two days. Evans will again take questions from the audience.
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Tuesday’s Earnings Highlights
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Before the Open: CVS (1.57), USFD (.36)
After the Close: VVV (.31)