Inflation expectations are beginning to pick up as the longer end of the yield curve ticks higher. It sort of explains the move in equities because bonds yields are near 0% and safe haven assets don’t provide the same level of income as in years past.

Stimulus is dead until after the election and don’t let the daily headlines fool you. Any progress in talks in superficial at best and to save political face. One thing we know for sure is we need stimulus to save specific sectors such as Airlines, Hospitality & Restaurants. Without it, a majority of these companies will be gone by the end of 2020.

Defense and Healthcare stocks are beginning to trade down on worries of legislation and lower government budgets. A “blue wave” is expected to hit defense contractors because typically under a democratic administration, the defense budget contracts. And in healthcare, there are worries about drug price legislation and other healthcare mandates.

The S&P 500 is being technically driven and as long as it remains above the 50 day moving average of 3400, we could see the uptrend stay intact. For now we need to wait and see what happens in Congress with the elections and Stimulus.


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