DE | Sinai Economic and Market Perspectives  Economic | Lots Happening—Election, Economy, Spectacular Earnings – 11/5/20

Posted November 5, 2020 by rvillareal

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Lots Happening—Election, Economy, Spectacular Earnings,
Biden and Republican Senate Market Rally—But Then What?

Lots happening this week and will be so beyond—at least five happenings! Minuses and pluses; pluses and minuses.

Election ’20—A Minus, Now a Plus for Markets

First and front-and-center is Election ’20 and its Aftermath—a minus last week, plus this week.
A huge set of uncertainties Pre-Election Day existed in all of its permutations and combinations—the uncertainty of who would win; the makeup of Congress; whether a chaotic or peaceful transition; its shape and form. Unknown and uncertain remains the Washington dimension and the policies to be forthcoming after Election ’20 is settled.

The policies will depend upon the Election results, still unfolding, the outcome for Congress and its composition, what happens in-between November 4 and January 20, and beyond.
The uncertainty of this all had been a big short-run negative.

But now it is a big short-run plus for markets with the uncertainty and craziness of a Trump Administration, bizarre relative to history and absolutely, likely over. Relief has been registered in the equity market and the “Mood of America” has been lifted!

The most preferred market Scenario, hope for a Biden Presidency, Republican Senate and a Democratic House is helping to drive a stunning Relief Rally near-term within a new, higher S&P500 Fair Market Value Range estimated by Decision Economics, Inc. (DE) as a 3525 midpoint and 3800 the upper bound and 3150-to-3200 the lower bound.

The upshift in the Fair Value Range stems from an incredible and spectacular earnings track in Q3 relative to expectations and an estimated much higher S&P500 earnings level next year. For the given DE Basic Prospect macroeconomic scenario and a continuing Ultra Easy Fed monetary policy stance, the new estimate for the DE S&P500 2021 Op. EPS is $167-to-$169, well above just one week ago’s $163-$165 and before that $160. Plus, the underlying reasons support this post-Election ’20 rally.
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