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The Wild Roller-Coaster Ride

Though the election is disputed, Biden’s lead seems unassailable and his path to 270 is almost certain.

To say that it was a crazy ride yesterday would be an understatement. Early on, it seemed like Biden was going to ride the blue wave to victory. The odds, then, swung from Biden being the fav to Trump being the sure thing before Biden’s advantage in mail-in ballots (which were counted more slowly in rust belt states such as Michigan and Wisconsin) ate away at Trump’s lead and took Biden to an almost certain 270 electoral vote count.

Various asset classes swung up and down as the odds changed and shifted throughout the day. The directions that currencies, bonds and stocks went during the course of the day was confusing to say the least.

Bonds sold off when it seemed like a Democrat sweep would unleash massive stimulus measures and lead to huge borrowing needs for the government. When it became clear that it was likely that the Republicans will retain the Senate, and will likely block exorbitant stimulus spending, bonds recovered strongly and even closed higher on the day.

The stock market, on the other hand, just had intermittent sell-offs when fear of uncertainty increased, but each sell-off seemed to be met with inexorable buying. It kept grinding higher throughout the day.

Though the election is disputed, Biden’s lead seems unassailable and his path to 270 is almost certain. Should he gain another state (Georgia, for example) to give him a bigger electoral count, the market is likely to greet this with joy as that would put an end to any doubts about his mandate.

With the fear of worst case scenarios ebbing fast, risk assets are likely to continue the rally in the days to come.


  1. Gold & Silver — Strong support for Gold is at 1850–60 and for silver, major support is at 21.80–90. Price action continues to look good. Strong early rally when Biden looked set to sweep the electoral votes but then faltered hard when the odds swung in Trump’s favour. However, as the day wore on, repeated attempts to try lower failed. Looking good for now, stay patient.

Key risks — With the major risk of the election largely over, the market will soon move on to how smooth the transition would be. Lower interest rates in the longer end of the US curve is good.


Market Movements as of New York Close 4 Nov 2020
  • U.S. ISM Non-Manufacturing Index for October checked in at 56.6% (expected 57.3%), versus 57.8% in September. October marked the fifth straight reading above 50.0% — the dividing line between expansion and contraction — but it was the lowest reading since May. The report is that it points to an ongoing expansion in the services sector, albeit at a somewhat slower pace than the prior month. The market was all about the US elections drama so the data print had no impact.
  • Dollar fell against a basket of currencies on Wednesday after a wild trading session which saw it hit highs of 94.30 (+1.29%). Democrats looked unlikely to take control of the U.S. Senate, leading investors to unwind bets that a large fiscal package is likely. Democrat Joe Biden held a narrow lead in Wisconsin on Wednesday after officials completed their vote count in the pivotal state, a major boost in his quest to win the U.S. presidency from Donald Trump. A so-called “blue wave” of votes for Democrats did not emerge as many had expected, however, making it likely that Republicans will maintain control of the U.S. Senate, and oppose any massive stimulus spending increase.
  • The Dollar Index was down -0.16% to 93.41, after reaching a one-month high of 94.30 overnight. The EUR gained 0.18% to $1.1731 after dropping to $1.1602 (-1.36%), its lowest since July 24. The greenback was little changed against the Japanese yen at 104.44 JPY. CNH had wild swings as the odds swung from one candidate to the other. It started the day strong as the early indications were that Biden would easily sweep the electoral votes and expectations that US-China relations would improve rose, pushing USDCNH down below 6.6500. However, as Trump took the lead in Florida and Texas, USDCNH reversed and hit a one-month high of 6.7741 (USDCNH, +0.82%). Then when Biden started to make headway in the rust belt states, CNH started to strengthen, and USD fell against it, touching a two-year low of 6.6190 (USDCNH, -0.85%) in the afternoon of the NY trading session. With Biden firmly in the lead, it finally closed near the day’s lows (6.6249, -0.81%).
  • S&P 500 rallied 2.2% on Wednesday, as the prospect of a divided Congress appeared to outweigh the fact that there was no presidential winner announced. The Nasdaq Composite rallied 3.9% amid strength in its mega-cap/growth components. The Dow Jones Industrial Average gained 1.3% while the Russell 2000 increased just 0.1%.
  • The votes were still being counted by the market close, but the consensus was that the Democrats would retain majority in the House and the Republicans would retain majority in the Senate. Presumably, the expectation was that a massive stimulus bill, an increase in the capital gains tax rate, or a Medicare for All public option would not pass in Congress.
  • Furthermore, the presidential outcome uncertainty threatens to delay a potentially smaller-than-hoped stimulus deal, although Senate Majority Leader McConnell said a stimulus package should be passed by the end of the year. A delayed/smaller stimulus deal could mean a slower economic recovery, which would benefit growth stocks over cyclical stocks.
  • Accordingly, the health care (+4.5%), communication services (+4.3%), information technology (+3.8%), and consumer discretionary (+3.1%) sectors did the heavy lifting, while the materials (-1.7%), utilities (-1.6%), financials (-1.3%), and industrials (-1.0%) sectors closed sharply lower.
  • Note, former Vice President Joe Biden led President Trump 237–214 in the delegate count as of 4:00 p.m. ET. The way the count is going, Biden is set to finish with at least 270 electoral votes when the dust settles.
  • Chinese President Xi pledges to import more as the pandemic shakes the global economy. China will import over $22 trillion worth of goods over the next decade, and the country is accelerating its opening up in spite of the global coronavirus pandemic, Chinese President Xi Jinping said on Wednesday. Speaking via video message at the opening of the Nov. 5–10 China International Import Expo, or CIIE, an annual import show in Shanghai, he said the world should not let unilateralism and protectionism undermine the international order. “We should take a constructive stance to reform the global economic governance system and promote an open world economy,” he said via video message.



A Democratic drive to win control of the U.S. Senate appeared to fall short, with Democrats picking up only one Republican-held seat and also losing one of their own seats. 6 other races remained undecided early on Wednesday.

To win the majority in the Senate, Democrats would need to pick up three Republican seats if Democratic presidential nominee Joe Biden is elected president and Senator Harris wields the tie-breaking vote as vice president.

But the Democratic path to victory narrowed sharply as results poured in and the final outcome may not be known for days, and in some cases, months.

Thematic Context: “Regardless, the wall of money is awaiting and huge macro dislocations should be taken advantage of because the outcome is inevitable. (with the U.S. the buyer of last resort due to lack of foreign buying of U.S. debt, the only way out is balance sheet expansion regardless of who wins). — 2nd Nov 2020

It’s election day and no amounts of analysis can prepare you for a highly contentious outcome. Early votes historically favour the Democrats by 2–1 and that’s why we are seeing many attempts by the Republican party to get the state courts to throw out the early votes. Regardless as we have been saying, do not lose sight of the forest for the trees and be prepared to take advantage of any macro dislocations that will arise.” — 3rd Nov 2020


While President Donald Trump wants the U.S. Supreme Court to weigh in on a presidential race that is still too close to call, it may not be the final arbiter in this election, legal experts said.

They said it was doubtful that courts would entertain a bid by Trump to stop the counting of ballots that were received before or on Election Day, or that any dispute a court might handle would change the trajectory of the race in closely fought states such as Michigan and Pennsylvania.

With ballots still being counted in many states in the early hours of Wednesday morning, Trump made an appearance at the White House and falsely declared victory against Democratic challenger Joe Biden.

The Supreme Court previously declined to fast-track an appeal by Republicans. But three conservative justices left open the possibility of taking up the case again after Election Day.

“I think the Court would summarily turn away any effort by the President or his campaign to short-circuit the ordinary legal process,” said Steve Vladeck, a professor at the University of Texas at Austin School of Law.

“Even Bush v. Gore went through the Florida state courts first.”


Democrat Joe Biden said on Wednesday he was headed toward a victory over President Donald Trump in the U.S. election after claiming the pivotal Midwestern states of Wisconsin and Michigan, while the Republican incumbent opened a multi-pronged attack on vote counts by pursuing lawsuits and a recount.

Wisconsin and Michigan gave Biden, the former vice president who has spent five decades in public life, a critical boost in the race to the 270 electoral votes in the state-by-state Electoral College needed to win the White House. Trump won both states in his 2016 election victory. Losing them would narrow his path to securing another four years in office.

“And now after a long night of counting, it’s clear that we’re winning enough states to reach (the) 270 electoral votes needed to win the presidency,” Biden said. “I’m not here to declare that we’ve won. But I am here to report that when the count is finished we believe we will be the winners.”

At the moment, including Wisconsin, Biden leads Trump 264 to 214 in Electoral College votes.


GBP: Bank of England is expected to increase their QE programme by 100 billion GBP. Market impact is likely to be limited unless they surprise with a bigger number. Brexit negotiations (yes, still) continues.

Expect volatility in markets today as the final vote counts come in and investors grapple with the ensuing response from the Trump administration.




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Phan Vee Leung
CIO & Founder, TrackRecord



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