This Week's 'My Take' from Financial Advisor Joe Stango

Reprinted with permission

Hello My Friend,

Once again volatility defined the movements in the markets last week as it continues to respond to health, economic and political news, ignoring fundamentals thus widening the chasm between Wall Street and Main Street.

Last week we had economic news that showed the economy is continuing to grow but at a much slower pace than what is needed and what is possible. It goes with out saying that the markets had a good week however, not without the ups and downs that volatility brings. Last week the markets reacted to the stimulus news once again. Earlier in the week the President announced he was walking away from the negotiation table due to, what he described as, Speaker Pelosi’s “unwillingness to negotiate in good faith.” She responded with similar words regarding the president. The markets reacted negatively to the news."

The political drama continued with the president putting forward the idea of a patchwork stimulus plan. He floated the idea of having congress vote on certain pieces of stimulus rather than a whole package. However, the Speaker said no to the idea, but the market took it as a sign that talks were continuing behind the scenes and turned higher. Finally, later in the week the president, through Treasury Secretary Steve Mnuchin, increased the administrations stimulus offer by $2 billion dollars to. $1.8 Trillion and the markets continued to rally closing with a positive gain on Friday. On Saturday, however, Speaker Pelosi said no to the offer once again so we will have to wait until the opening on Monday morning to see the reaction by Wall Street.
If a stimulus deal is not done this week it will seem unlikely that any package be passed in this congressional cycle. Stalling any a bill will cause the economy to slow even further and, making matters worse, it is possible we may not see a stimulus deal until the new year.

The silver lining in all of this is the sense that the market has baked in a blue wave on November 3rd. All of those who thought a Biden victory would cause the markets to take plunge will be surprised to find that investors are already factoring a Biden presidency into the market mix. The only surprise to the market now will be if the President wins re-election. Even if he does win it will likely cause the market to re-adjust and rotate into those sectors who will continue to do well under a second Trump administration. The market currently is readying for the blue wave as it embraces sectors such as green energy and companies tied to government spending on infrastructure.

The worry for me is not the outcome of the election but how far the markets will continue to elevate valuations from economic and corporate fundamentals. At some point one has to catch up to the other and this is not an “if it occurs” scenario it is a “when it occurs.” Once thing is for certain, if we do not get a relief/stimulus package the chasm between the two will find it difficult to narrow.

As for now the market movement is seeded in two base factors: continued financial liquidity and a political blue wave.

You are welcome to join me this morning at 10:10 AM on WATR’s Talk of the Town with host Steve Noxin. Knowing Steve we will dive deeper into the economy, markets and the effects of the upcoming election. Join us at: www.watr.com.

Stay Safe this week!
Sincerest Regards,
Joe

P.S. Are you ready to make the first step towards financial confidence? Take the 3-Minute Confident Retirement® check and share your results with me today.

Joseph J. Stango
Vice President - Financial Advisor
Centurion Wealth Management
A private wealth advisory practice of Ameriprise Financial Services, Inc.