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i want to dig into the market reaction as i said stocks continue to jump despite that uncertainty so joining us now to break down why that might be is tom lee fund nd tom i mean heading into this we were talking about how we might not know the results for quite some time investors largely hoping to get some clarity by friday heading into this but if i were to tell you that nasdaq would be up four percent today after we don't have any clarity what would your reaction be and just what's your general takeaway from what we saw last night uh well let's see you know one of the things i've learned in my you know 25 years doing research is i can never tell the stock market what to do so you know it's always going to surprise me and i think this rally kind of speaks to i mean if i were to guess i think it's telling us there's probably more certainty on the outcome than is implied by either the state of the electoral college or by the headlines so i think part of this is the market already seeing you know a path to uh who's in the white house and but then the other piece is you know we have to remember there's been a buyer strike for like the past three weeks i mean that's why we were down almost 10 the nasdaq got obliterated because of the fears of a capital gains tax increase so that's kind of off the table with the senate staying republican and as you know joe biden and mitch mcconnell are quite friendly so i think that there's uh potentially quite a spirit of cooperation that could develop even though it is not a blue wave so i think overall um stocks have proven once again the ability to rally that's one thing we've been talking about that you know even in the three scenarios even a contested undecided outcome we thought the market could rally but it's obviously better than we expected yeah i mean when you say that you think the market has uh determined uh where this is going to go it's a little surprising since we still haven't seen definitive results i guess obviously there's going to be some key uh maybe perhaps even we're hearing recounts and some key swing states here so talk to me about where you think the market is judging this is going to go uh yes i mean you know again you know i don't have the uh i haven't cracked the secret code for what the market's true language is um but you know if i took a look i'd say that two groups that would would have been the most positively correlated to a trump win would have been mortgage reits which according to our data scientist tireless ken that was the number one most correlated sector and then energy and those are posting tepid rallies so part of my sort of guess is that if people are using a color by numbers you know like how are markets influenced by movements in poll strength for either biden or trump it's saying that biden is is is is the likely next president and that's what i think the market is telling us today i mean having said that you know going back to the point our previous guest and neil ferguson made look we could be in for a very protracted fight here even if ultimately joe biden does win and i'm curious from a market perspective what does that mean for positioning should investors be prepared to just ride out this volatility or are there uh opportunities uh potentially uh you know investors should be looking to take money off the table yeah well i mean it's there's uncertainty right because um it's one thing to maybe dispute the election outcome uh so we have a protracted period where the final decision isn't legally made but there's a time when the markets will view it merely as a formality um and just going through the motions i think the clue you can say is you know see what the vix is doing and today the vix is down you know almost 20 i mean it's below it's like 28.
i mean i just i guess again this is a period of uncertainty so i'm not trying to speak with certainty but if the vix falls till like 25 it's saying that it doesn't really matter if there's a legal fight i again i'm not you know i'm not saying it's going to 25 but if it if it moves at this pace and it goes to 25 i mean it's pretty much just it's saying that there's a clear winner yeah i mean you know we're not trying to say this is what's going on or this is what's going to happen you're just looking at the indicators and saying look these levels would seem to indicate a relative a risk on or at least you know investors being calm with the way things are going when it comes to portfolio rebalancing though you also broke out what sectors and stocks might benefit from either this going bidens or trump's way and looking at the list it's interesting to see kind of some overlap in a lot of the cyclical stocks you've been talking about for quite some time so talk to me about what you're seeing play out there regardless of which way this goes yeah i mean i think one of the positives um of this outcome is we under this scenario with the republican controlling the senate i think the chances of stimulus before your end have actually gone up um because you're not having a lame duck session where all three chambers are changing um and so i think there's a good possibility of some sort of stimulus and at the end of the day the market doesn't need a massive stimulus bill it actually needs to put a lifeline to those millions of americans that are suffering i mean you know we're still just coming out of a depression and there's a lot of people that need checks and a financial bridge and you know it's unfortunate that this election kind of short circuited that process but people desperately need that money so i think there's also good news there and i think that's why some of these cyclicals are managing to rally and um you know that's still the bet i would make into your end i mean you know a lot of things are still uncertain out there though so i mean you know i'm in the camp i think we get a 10 at least 10 percent rallying to your end but i'm you know i mean coronavirus is not under control yeah on that flip side point though tom i mean when we talk about downside risks and maybe not getting that obviously the political games were going to be played heading into election day to see how these votes were going to go now that we're past that one would hope uh that you could get on to the time where republicans democrats can come together and realize the point you're making that the average american out there who's depending on some of this aid to come through can't wait much longer doesn't want to wait much longer so when you think about that and the flip side of not getting it as we head into the winter months obviously the holiday shopping season going to loom pretty important here how does the underlying data stack up in your view as whether or not it looks a little bit shaky if you don't get that round of stimulus before years end yeah it's gonna definitely be shaky um you know we're already seeing some soft lockdowns uh because the you know we're in wave three of this coronavirus spread and even if it's only in 30 percent of the country you know covets still quite contagious and it's out there and so soft lockdowns are going to slow people's movement and the economy so a financial bridge is really important um i i don't know how to handicap it i guess i would just be to me watching a lot of the cyclical groups today they're acting like the chance of a deal has materially moved up just because the election was preventing people from even having any idea any foggy idea of what you know which way that would go
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