Market Insights: Market Commentary - Can the Stock Market Predict the Next President of the United States?
Milestone Wealth Management Ltd. - Aug 07, 2020
Macroeconomic and market developments Equity markets were positive this week, with both Canada and the US markets in the green. The price of US oil was up this week, with US WTI trading around $41. Canadian WCS was trading around $28 on Friday, rough
Macroeconomic and market developments
- Equity markets were positive this week, with both Canada and the US markets in the green.
- The price of US oil was up this week, with US WTI trading around $41. Canadian WCS was trading around $28 on Friday, roughly flat from last week. During the week, oil did spike, partly due to the explosion in Beirut, however, prices slid as the week went on.
- Gold made headlines this week, touching the $2,000 mark for the first time, trading at around $2,030 on Friday.
- Apple moved slightly higher this week, inching its way to possibly becoming the first publicly traded company ever to reach the $2 Trillion valuation mark. As of Friday, it had a market cap of just under $1.9 Trillion.
- July employment numbers were reported in Canada and the US this week. Headline US nonfarm payrolls saw a gain of 1.763M, which was above consensus that was calling for ~1.5M. The unemployment rate also fell 0.9% to 10.2%. Statistics Canada's Labour Force Survey showed Canada gained 419K jobs in July, down from previous month's +953K print and roughly in line with consensus, while the Canadian unemployment rate dropped 1.4% to 10.9%.
- Canada-US trade tensions dominated the headlines after President Trump said he will reimpose 10% tariffs on Canadian aluminum. Ottawa quickly retaliated with Deputy PM Christia Freeland stating Canada would impose C$3.6 billion worth of tariffs on US goods. Meanwhile, US commerce and manufacturing leaders strongly oppose Trump's decision noting it will raise manufacturing costs and hurt relations with a key free-trade partner. The Wall Street Journal cited Alcoa, the largest US aluminum producer, stating tariffs will only cause "unnecessary disruption" and don't address the bigger issue of overcapacity from China.
- US-China tensions elevated after Trump signed executive orders prohibiting Americans from doing business with TikTok and WeChat. Trump administration also recommended a plan to crack down on Chinese companies listed in the US. TikTok was in the news this week as Microsoft may attempt to buy the short-video service.
- The number of confirmed COVID-19 cases in Canada rose to just over 118,000, with the US total cases at just over 4.8 million, with the death toll now approaching 160,000. Globally, the total cases are approaching 19 million, up from 17 million last week.
Chart of the day
With the US election approaching, we will leave you with a chart this week to consider. Stocks historically have a stellar track record at predicting who might win in November. If stocks are up from the beginning of this week until the election, the incumbent party wins. If the market is down, the incumbent party tends to lose. This has proven to be right 87% of the time since the Great Depression.
Source: Bespoke Investment Group