Week ending November 1, 2024: Key Market Highlights

The S&P 500 drop: Key points on the chart are the breaking of the ‘rising wedge’ pattern (red & green dashed lines), and the testing of the 50-DMA (blue line). The 100-DMA (red wavy line) at 5592  would be the next key technical support level.

Volatility Risk: The past 12 months have delivered some of the strongest risk-adjusted returns in market history. However, volatility is now on the rise, driven by the increasing likelihood of a fiercely contested presidential election. In today’s polarized political landscape, this is far from a remote possibility.

Election Showdown: One way to gauge market sentiment on the US election outcome is by tracking the action on Trump’s media stock. From May to late September, investors were unloading the stock. Then, momentum shifted dramatically as buying surged—only to taper off about a week ago. This pattern suggests a razor-thin race, with Harris picking up momentum as election day approaches.

Investor optimism hits record high: The Conference Board surveys respondents on whether they believe stocks will rise or fall, and the current bullish sentiment has reached its highest level since the survey’s inception in 1986. What could go wrong?

Oil prices spike with escalating tensions: Oil prices climbed at the week’s end, fueled by rising tensions in the Middle East. Reports suggesting that Iran might be preparing a major attack on Israel have sparked concerns over potential disruptions to the region’s oil supply.

Market insights: The biggest relief about the US election may simply be that it will eventually conclude. Yet, the process could stretch for weeks, with disputes over vote counts and tactics adding to potential chaos. While we don’t anticipate a lasting impact on the market, the uncertainty is likely to drive short-term volatility and speculative losses. The best ‘election trade’ might be patience: staying focused on long-term fundamentals rather than getting swept up in the noise. In time, the distraction will fade, and attention will shift back to what truly matters.

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