The first presidential debate of 2020 is tomorrow night. We are very likely to see record viewership. We’ve looked back to see the impact debates have had on the markets historically. Going back to 1960, the S&P 500 has averaged 0.14% to the upside the day following the first presidential date. Not a huge impact on the individual market historically, but we have seen impacts on individual sectors. If Biden does well in this debate then we could potentially see a boost in stocks related to global trade and renewable energy. If Trump does well then we could potentially see a boost in fossil fuel stocks and defense companies. Time will tell, but we should see some fireworks.
Last week we talked about the support level of the S&P 500 being at 3,300. The S&P 500 closed at 3,298 on Friday. So, now that 3,300 becomes our new resistance level. If it breaks past that level our next resistance levels will be at 3,330 and 3,390 after that. If it goes below 3,300 we are looking at a 3,240 support level and some lower than that. Also, with the presidential election and debates coming up, it’s important to understand that it’s not just levels we are observing but also the 11 sectors of the market and how they are reacting to certain circumstances. The 4-week moving average of all 11 sectors have been in the red, or in other words, negative. This is a trend we have our eyes on to see which individual sectors could start to feel some impacts of future events along with consumer sentiment.
We have mentioned several times on this vlog how we believe the S&P 500 performance 90 days out from an election is a much better predictor than most polls. The reason why this is important to look at today is that on August 3rd the S&P 500 closed at 3,294. Like Adam pointed out, on Friday we closed at 3,298. A lot has happened since August with markets going both up and down a good bit. However, it’s almost like that election timetable is restarting right in time for the fist debate. That’s not by accident and it’s more than likely a lot of investors bringing the election back in to focus and not making a call either way. How things go in the debate could indicate where the S&P 500 is going from here until the election date. If the S&P goes lower than the 3,294 that has given us a historical indicator that Biden could win and if it goes higher than we could possibly see Trump stay in office.
If you look at September, dealing with consumer expansion and manufacturing numbers, they look good. The delta, how fast things are advancing, is starting to pick up. In addition to this, we could see this trend continue, especially on the manufacturing side. This is because they had to drive their inventory down when Covid was peaking but are now going back in and building it back up. This could be a good tailwind between now and the end of the year.
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
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