Tech stocks have hit a wall, unable to remain afloat on a tide of stressful news. Although Wall Street would have us believe investors shouldn’t care who wins the election, this idea is preposterous. There is simply no way that a takeover of Capitol Hill by the Democrats could be perceived as good for business and the economy. But there’s a Catch-22 if Trump succeeds, since a court decision paving the way for a second term could gravely unsettle America for years to come.
A vaccine remains a bullish wild card, as the mindless herd demonstrated on Monday. Pfizer announced a drug that supposedly has been 90% effective in trials, touching off the most powerful one-day rally in stock-market history. The clinical basis for the drug maker’s claim went largely unexplored at first, presumably because the stock market’s canny masters had every reason to avoid hard questions that might queer the celebratory mood . But doubts surfaced on Tuesday nonetheless, causing shares to extend Monday’s tech-led retreat.
Tiredness seems likely to remain the market’s theme until after the election is settled, which could take as long as two months. Small-cap stocks may be raring to go because that is the ‘story’ the stock market’s masters have been hyping non-stop, but they will not get very far with the FAANGs and other insanely overbought lockdown winners weighing them down. Conclusive news of a truly effective vaccine could goose stocks into a parabola at any time of day or night. However, even a truly miraculous vaccine would not suffice to justify the sensational earnings multiples achieved by many stocks after the lockdown. This could present as promising an opportunity to “buy the rumor and sell the news” as a trader could hope for. _______ UPDATE (Nov 11, 6:35 p.m.): Stocks showed no particular strength Wednesday and appear to be under delicate distribution. Although shares often seem to rally on any kind of news whatsoever, the really good stuff that causes them to explode — i.e., an effective vaccine(!!!!!!!!) — will be timed for maximum effect. It’s hard to know at this point how often such news will come, but my guess is that an interval of at least 15-20 days must pass to optimize their credibility (such as it is) and effect. _______ UPDATE (Nov 12, 9:42 p.m.): There was a time not long ago when we assumed stocks were coiling for a strike whenever they looked tired. These days, however, the tiredness seems real, even if DaBoyz are unlikely to pull the plug until they’ve had at least a few more days to distribute stock before the broad averages recede substantially from Monday’s crazed peak.