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Larry Berman

Berman's Call

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We are going to get another stimulus bill. We think U.S. President Donald Trump needs it more than the Democrats to keep the stock market supported on Nov. 3. History suggests the markets do not like the potential for the incumbent to lose elections nor the uncertainty of changed policies. In this case, there are very different policies between Trump and Democratic presidential nominee Joe Biden.

Since 1900, an incumbent Republican loss suggests about a 10 per cent market risk heading into the election as measured by the Dow Jones Industrial Average. In general, the market tends to exhibit a post-election rally. But this is not a normal election.

It’s clear by market behaviour and response to “stimulus”-based headlines there is great expectation of a stimulus bill. This is a huge political potato and an election negotiating tactic. Congress passed a US$2.2 trillion bill Friday and Trump wants to “get it done.” But House Speaker Nancy Pelosi said Friday that the two sides are still fundamentally far apart. U.S. Treasury Secretary Steven Mnuchin’s offer was US$1.6 trillion.

If no bill gets done this week, I expect the markets to begin this weakening trend. The 200-day average for the S&P 500 is as around 3112 (-7.6 per cent) and at 9654 (-16.6 per cent) for the NASDAQ 100. As we approach the October options expiry Oct. 16, the 3200 and the 3400 areas for the S&P 500 offer up key areas of potential hedge buying (3400) and hedge selling (3200).

Our Berman’s Call virtual roadshow is back on. We had our first show on October 1, 7 p.m. ET and you can see the replay here. Sign up for the series at www.etfcm.com every Thursday at 7 p.m. ET. The series will run weekly into early December. There will be lots of opportunity to ask questions of markets and your favourite ETFs and stocks.

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