election day +6 — a day to watch prices carefully

When Asian trading of US stock futures ended very early this morning, the results were as follows:

S&P 500 +1.35%

NASDAQ +1.72%

Russell 2000 +1.21%

Dow +1.32% (as regular readers will know, I think the Dow has about as much relevance today as buggy whips and blocks of ice to use for refrigeration have in our daily life–less, actually …but it can serve as an indicator of how stocks of the past are moving. And its use identifies commentators as being totally clueless)

Anyway, the Pfizer announcement of a successful trial of a covid vaccine (90% effective in preventing the disease, with few side effects, according to the announcement) after Pacific trading closed has made those prices irrelevant. As I’m writing this at 8:15am est, the index numbers are:

S&P 500 +4.07%

NASDAQ +0.05%

Russell 2000 +7.00%

Dow +5.61%

European stock markets that I’ve checked are all up by about 5%.

This is not 100% covid, of course. Over the weekend, it became clear that Trump, his economic idiocy and his nazification of American life, have been voted out of office. Also the year-to-date performance difference between multinational growth stocks, +40%-ish, and the Russell 2000, flat, has been so extreme that it was inevitable that sooner or later the latter would have its day in the sun. All that said,

my thoughts

It’s hard to know how large or long-lasting this rally will be. So I’m mostly going to watch.

I’m most interested what economically sensitive stocks go up the most; and what high-fliers crash the hardest. If past form holds true, the best performers will be firms that Wall Street has left for dead. All the former stars will likely go down, but there might/should be a difference between names that are radically dependent on the pandemic continuing (these are the main targets for culling, I think) and plain old multinational secular growth stocks.

I also want to see if/how the pre-market view is sustained as the day progresses

At the very least today we’ll a glimpse into how our portfolios might fare in a post-covid, post-Trump world. For me, the picture is probably not going to be particularly pretty. I’ve been inching away from my all-in pro-covid portfolio for a number of months. I have a 10% position in a Russell 2000 etf, for example. But experience tells me that this won’t be anywhere near enough to prevent me from having a bad relative performance day.

That, however, is life as a portfolio manager.

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