Opening Bell: Politically-charged portfolios

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10 THINGS BEFORE THE OPENING BELL

Good morning, readers. Senior reporter Phil Rosen here, writing to you from Manhattan. It's election day in the US, and countless polls signal that money is top of mind for voters.   

Americans for months now seem to only care about the economy. Inflation's at a multi-decade high, housing costs are painful to look at, and prices at the pump remain stubbornly elevated. 

Whether or not this means Democrats hold onto their majority or Republicans claim victory in today's elections is still an open question. For moment-by-moment updates, tune in to coverage from my colleagues on the politics team

But to understand how today's results might impact investors, stay right here with me. 

Let's get started.


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vote voters midterms

1. If Republicans gain seats in today's midterm elections, the thinking is that Democrats would have a harder time passing aggressive fiscal spending plans. 

But political gridlock is a good thing for your portfolio. It makes any major policy shifts less likely, and markets love predictability. 

Morgan Stanley's Mike Wilson, who Institutional Investor recently named as Wall Street's top portfolio strategist, said the S&P 500 could climb as high as 4,150 this week in a decisive Republican victory. 

"[T]he Republicans have talked about freezing spending via the debt ceiling much like they did in 2011 (the Budget Control Act)," Wilson wrote in a Monday note to clients. "This would be a sharp reversal from the past few years when budget deficits reached levels not seen since WWII. In our view, a clean sweep by the Republicans on Tuesday could greatly raise the odds of such an outcome."  

But Wilson also warned markets could see near-term volatility in the event of a delay in the results. 

On the other hand, if Republicans fail to gain a majority in either Congressional chamber, heightened market volatility could ensue because that'd fall outside most predictions

Fundstrat's Tom Lee echoed Wilson's forecast yesterday, noting that election results could mark a turning point for investor sentiment. 

Lee sees the midterms — as well as Thursday's inflation data — as a "game changer" for traders. Even if downbeat results trickle in, the long-time bull said markets could rally because they've already priced in bad news. 

As for a Republican takeover, Lee's going to be eyeing a couple developments: 

"If the Republicans gain control of the Senate, we think funding for the war would also become more difficult. And this likely puts pressure on US policy regarding Russia-Ukraine."

What's your view on how a Democrat or Republican victory in today's midterm elections impacts the stock market? 

Let me know on Twitter (@philrosenn) or email me (prosen@insider.com).


Vladimir Putin

2. US stocks and bond yields inch higher early Tuesday, with Wall Stree eyeing the ballot boxes. Shares of both Lyft and Tripadvisor slumped roughly 19% in premarket trading following disappointing earnings reports. Meanwhile, Americans' confidence in home buying dropped to its lowest level since Fannie Mae's survey began.

3. Earnings on deck: Walt Disney, Nintendo, and AMC Entertainment, all reporting.

4. Top investors are taking advantage of steep discounts in the bond market. With yields at their highest levels in years and a possible recession looming, some investors say now is the best time to get in. Here's how you too can get in on the action.

5. Wall Street's 2023 earnings estimates are rolling in and they do not look bullish for the stock market. Corporate earnings growth and stock prices have a direct relationship over the long term. Goldman Sachs expects the S&P 500 to generate $224 in earnings per share for next year, down from its prior estimate of $234.

6. Europeans' gas bills have more than doubled even as governments pledge billions to cushion against soaring prices. Gas bills have skyrocketed 111%, while electricity bills have jumped 69% in every EU capital, according to VaasaETT. Get the full details here. 

7. Russia's oil exports to Asia hit the highest so far this year while Europe's sanctions inch closer. A fresh ban on Russian crude is set to kick in on December 5, so markets are rushing to complete last-minute deliveries of the soon-to-be-banned goods. To skirt regulations, an increasing number of vessels are leaving Russian ports without reporting a final discharge point.

8. This Seattle-based real estate investor has never lost money on a deal. Todd Baldwin prefers multi-family homes and brand new or relatively new construction. He broke down exactly why he says no to 99.5% of deals. 

9. Goldman Sachs named which stocks to buy now that can help you capitalize on gains during Tuesday's midterm elections. Investors can book quick profits with timely options trades as certain stocks make big moves, according to Vishal Vivek. Here are the top 18 names to watch.

DWAC Spac

10. After former President Donald Trump teased a 2024 White House run, shares of Digital World Acquisition soared 59%. At a rally in Florida on Sunday, Trump had this to say about the coming presidential election: "I will probably have to do it again, but stay tuned."


Keep up with the latest markets news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.


Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com

Edited by Max Adams (@maxradams) and Lisa Ryan (@lisarya) in New York.   

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