• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Obsessed With Election Results? Focus Instead on Company Fundamentals

We could still get some volatility over the next few days, regardless, a fiscal bill is coming to help the economy.
By MALEEHA BENGALI
Nov 04, 2020 | 11:56 AM EST

We are still waiting for the Election 2020 results as six battleground states have yet to report their final verdict, but deja vu, just like 2016, the betting markets and polls got it entirely wrong. One wonders why they even exist. Over the past few weeks, the market was convinced a blue Democratic sweep would be the result and a near certainty of a $2.2 trillion stimulus bill for infrastructure. Overnight as Trump managed to win Florida, which was assumed to be a blue victory, and Texas, the betting markets shifted the 60/40 Biden victory to more like 60/40 for Trump! But what does that really mean for markets and asset classes?

The markets fell 8% these past few weeks in October, primarily as the Technology sector got slammed post record earnings and near 35%+ EPS year over year growth rates. It's a brave new world that saw massive profit taking as sector rotation forced fund managers to close out their Technology overweights and buy back their shorts in Cyclicals/Value oriented names. One of the main reasons for this was if Biden won, taking the Senate as well, the massive fiscal bill would boost infrastructure oriented stocks and sectors, like Copper/Construction/cyclically sensitive stocks as the economy bounced back. U.S. 10 year yields also reflected that view as they moved to 0.89% just last night prior to the vote count. Now that the Senate is definitely Republican and Trump potentially winning, at least not a clear-cut blue sweep, U.S. Bond yields have fallen back down to 0.76%, taking with it "cyclical rebound" hopes. This is why Copper and economically sensitive names fell early this morning.

Technology was sitting on its 100-day moving average, now as yields go back to 0.76% and lower, the old theme of chasing the defensives/growth oriented names returns. Ignoring the theme for now, this makes sense even from a fundamental point of view. Everyone is so fixated on trying to call the Presidency or the Dollar, they are ignoring the true genuine earnings growth apparent in these stocks that have tons of cash on their balance sheets and growing double digit. If one waits for the election result, the market will have broken out and these stocks missed their bottoms.

What is the pain trade? Certainly, a squeeze higher in Technology as most are flat in it after reducing their longs these past few weeks. Also from a technical point of view, the S&P 500 tried to break below 3225, but as it recovers 3400, it seemed that is a failed break, and now as it moves above 3420, technically the charts look all clear to go back to even 3500+.

Unwinds can be painful, but use that opportunity to pick your favorite stocks, and not be too fixated on macro. No matter who wins, Trump or Biden, they both want the same thing, a higher stock market and U.S. economic recovery. We are probably debating between $1 trillion and $2 trillion, but a fiscal deal will happen at some point. It just depends which stocks you play it through. Rather than play through Banks that are hoping for yield curve bull steepening, it is best played via quality names like large cap Technology and some consumer discretionary stocks that will benefit in the post Covid world seeing earnings rapidly growing. Oil does not care about macro, it is seeing genuine demand picking up, which is why the price is rallying. It is a seasonal game!

We could still get some volatility over the next few days, regardless, a fiscal bill is coming to help the U.S. economy. But for now, rather than waiting for that big Dollar move, or trying to call the sector rotation trade, focus on a genuine company earnings catalyst and valuation triggers!

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Maleeha Bengali had no position in the securities mentioned.

TAGS: Investing | Markets | Politics | Stocks | Trading

More from Investing

Bounce Takes Some of the Sting Out of a Painful Week

James "Rev Shark" DePorre
Mar 5, 2021 4:51 PM EST

It is premature to declare that the worst is over, but the intensity of the selling will go a long way toward helping a bottom to form.

The Selloff in Twilio Could Extend Deeper Into March

Bruce Kamich
Mar 5, 2021 2:30 PM EST

TWLO could bounce in the short-run but avoid the long side for now.

4 Important Takeaways From the February Jobs Report

Tom Graff
Mar 5, 2021 2:23 PM EST

Here's why we're probably multiple years from a Fed rate hike.

The Price Damage for Roku Is Not Over Yet

Bruce Kamich
Mar 5, 2021 1:25 PM EST

It looks like further declines are possible. Avoid the long side.

Roll the Dice on This Bounce

Timothy Collins
Mar 5, 2021 1:03 PM EST

This has given investors an opportunity to load up on small speculative names I love over the next 12 to 18 months.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:38 AM EST GARY BERMAN

    The INDU and DIA

    FIBOCALL: The INDU index and the DIA The INDU ...
  • 10:44 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "The Challenge of Short-Selling"
  • 08:40 AM EST PAUL PRICE

    Recent Pick SpartanNash (SPTN) Raised Its Quarterly Payout by 3.9%

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login