“The Dow Jones Industrial Average jumped past 30000 for the first time Tuesday, the latest milestone in a postelection rally turbocharged by promising results from three potential coronavirus vaccines,” the Wall Street Journal reports.
Stocks Rally on News Transition Moves Ahead
Financial Times: “Global stocks rallied after Donald Trump said his administration would co-operate with president-elect Joe Biden’s transition team.”
Judy Shelton’s Fed Candidacy Fails In Senate
Senate Republicans failed to secure enough votes Tuesday to advance the confirmation of Judy Shelton, an ally of President Trump, to a seat on the Federal Reserve’s board of governors, the Wall Street Journal reports.
However, Axios reports Sen. Mitch McConnell changed his vote to “no” — a strategy that could revive Shelton’s nomination down the line.
Harris Will Block Judy Shelton’s Fed Nomination
Vice President-elect Kamala Harris is in her Senate office today, which suggests she will be available to break the tie to block Judy Shelton’s nomination to the Federal Reserve, the Washington Post reports.
With Harris’ expected “no” vote, the final tally on Shelton’s nomination will likely by 48 to 49 against confirmation.
Deutsche Bank Looks to End Trump Relationship
“Deutsche Bank AG is looking for ways to end its relationship with President Trump after the U.S. elections, as it tires of the negative publicity stemming from the ties,” Reuters reports.
“Deutsche Bank has about $340 million in loans outstanding to the Trump Organization, the president’s umbrella group that is currently overseen by his two sons, according to filings made by Trump to the U.S. Office of Government Ethics in July and a senior source within the bank. The three loans, which are against Trump properties and start coming due in two years, are current on payments and personally guaranteed by the president.”
Trump’s Stock Market Gains Fall Short of Obama’s
“President Trump has presided over a stock market surge since taking office in 2017, but he’s been outpaced by three of his four predecessors,” Axios reports.
“The S&P 500 grew by 44.5% since Trump’s inauguration through the end of October 2020. This comes up short of former President Obama’s 66.1% through the comparable time period, but well above the -15.8% for former President George W. Bush.”
Why Wall Street Is Banking on a Blue Wave
“President Trump loves to say that if Joe Biden wins the White House, stocks will crash, retirement accounts will vanish and an economic depression ‘the likes of which you’ve never seen’ will engulf the nation. But much of Wall Street is already betting on a Biden win — with a much different take on what the results will mean,” Politico reports.
“Traders in recent weeks have been piling into bets that a ‘blue wave’ election, in which Democrats also seize the Senate, will produce an economy-juicing blast of fresh fiscal stimulus of $3 trillion or more that carries the U.S. past the coronavirus crisis and into a more normal environment for markets.”
“Far from panicking at the prospect of a Biden win, Wall Street CEOs, traders and investment managers now mostly say they would be fine with a change in the White House that reduces the Trump noise, lowers the threat of further trade wars and ensures a continuation of the government spending they’ve seen in recent years.”
Investors Had Early Reports on Virus Briefings
New York Times: “The consultant’s assessment quickly spread through parts of the investment world. U.S. stocks were already spiraling because of a warning from a federal public health official that the virus was likely to spread, but traders spotted the immediate significance: The president’s aides appeared to be giving wealthy party donors an early warning of a potentially impactful contagion at a time when Mr. Trump was publicly insisting that the threat was nonexistent.”
“Interviews with eight people who either received copies of the memo or were briefed on aspects of it as it spread among investors in New York and elsewhere provide a glimpse of how elite traders had access to information from the administration that helped them gain financial advantage during a chaotic three days when global markets were teetering.”
Wall Street Fears Meltdown Over Election
“The death of Justice Ruth Bader Ginsburg and President Trump’s vow to name her replacement to the Supreme Court before November’s election are amplifying Wall Street’s worries about major volatility and market losses ahead of and even after the election,” Axios reports.
“The 2020 election is the most expensive event risk on record, per Bloomberg — with insurance bets on implied volatility six times their normal level, according to JPMorgan analysts. And it could take days or even weeks to count the record number of mail-in ballots and declare a winner.”
Bank of England Eyes Sub-Zero Rates
The Bank of England indicated that it could cut interest rates below zero for the first time in its 326-year history as it tries to shore up a U.K. economic recovery that is facing the dual headwinds of the coronavirus and Brexit, Yahoo Finance reports.
Fed Signals Interest Rates to Stay Near Zero Thru 2023
“Federal Reserve officials projected no plans to raise interest rates through 2023 and said they were committed to providing more support to an economy that faces an uneven recovery from the coronavirus pandemic,” the Wall Street Journal reports.
Why Fed Officials Are Pushing for More Stimulus
“Federal Reserve officials don’t like to wade into political debates, which is why it can be a distress signal when they do,” the Wall Street Journal reports.
“In normal times, central bankers generally avoid making specific recommendations on hot-button spending, tax and other policy matters handled by elected officials, because they want to preserve their autonomy to manage monetary policy with minimal interference.”
“These aren’t ordinary times. Fed Chairman Jerome Powell has delicately but resolutely said in recent months he expects Congress will need to do more to compensate for income losses sustained by unemployed workers and revenue holes facing hard-hit businesses and city and state governments because of the coronavirus pandemic.”
The Stock Market Isn’t the Economy
Paul Krugman: “But the stock market isn’t the economy: more than half of all stocks are owned by only 1 percent of Americans, while the bottom half of the population owns only 0.7 percent of the market.”
“Jobs and G.D.P., by contrast, sort of are the economy. But they aren’t the economy’s point. What some economists and many politicians often forget is that economics isn’t fundamentally about data, it’s about people. I like data as much as, or probably more than, the next guy. But an economy’s success should be judged not by impersonal statistics, but by whether people’s lives are getting better.”
“And the simple fact is that over the past few weeks the lives of many Americans have gotten much worse.”
Fed Seen Holding Rates at Zero for Five Years
“The Federal Reserve looks likely to keep short-term interest rates near zero for five years or possibly more after it adopts a new strategy for carrying out monetary policy,” Bloomberg reports.
“The new approach, which could be unveiled as soon as next month, is likely to result in policy makers taking a more relaxed view toward inflation, even to the point of welcoming a modest, temporary rise above their 2% target to make up for past shortfalls.”
Traders Brace for Haywire Markets Around Election
“The presidential election is three months away, but some traders are preparing for the possibility that prolonged political uncertainty will stoke stock-market mayhem,” the Wall Street Journal reports.
“The investors are going beyond the normal hedging ahead of a potential change in power in Washington. Instead they are betting on volatility and a possible market tumble later in the year. Among the concerns expressed by some: speculation that President Trump could try to delay the election or disrupt mail-in voting, as well as the chance that a result remains unclear for weeks after polls close.”
Treasury Bond Investors Signal Bad Times Ahead
“A collapse in real yields — the return that bond investors can expect once inflation is taken into account — is rippling through global financial markets and driving record rallies in assets from gold to technology stocks,” the Financial Times reports.
“The yield on 10-year inflation-linked US government bonds, known as Tips, sank below minus 1 per cent last week to a historic low, as investors bet that a surge in coronavirus cases would prolong the damage to the world’s biggest economy — and that the Federal Reserve’s efforts to stimulate demand could stir inflationary pressures.”
“The deeply negative Tips yield implies that large chunks of the Treasury market are expected to lose investors money, in real terms, over the next decade.”
Kodak Stock Surge Under SEC Investigation
“The Securities and Exchange Commission is investigating the circumstances around Eastman Kodak’s announcement of a $765 million government loan to make drugs at its U.S. factories,” the Wall Street Journal reports.
“News of the loan last week caused Kodak’s shares to rise as high as $60, before falling to about $15 on Monday due to a dilution in the shares. Amid the heightened volatility, trading volume has surged. The price spike briefly produced a potential windfall for company executives who owned stock-option grants, some of which were granted on July 27, the day before the loan became public.”
Kodak Stock Trades Surged Before Announcement
Reid Wilson notes that Kodak stock volume has ranged from 52,000 to 215,000 shares per day since July 1.
On Monday, the day before President Trump tapped the former film giant to make drug ingredients, 1,645,000 shares traded hands.
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