Monday Morning Wrap Up – September 28, 2020

Political risks are rising.

The stock market sank last week as the September sell-off continues, with technology stocks leading the way down. The Nasdaq 100 has plunged 12% since September 2nd. The FAANG stocks, which include Facebook, Apple, Amazon, Netflix and Alphabet (Google) have tumbled 15%. The S&P 500 has dropped 9% so far in September.

The stock market is lurching lower amid the growing uncertainty over the state of the economy, worries over the new COVID-19 outbreaks in Europe, the lack of another fiscal stimulus package and last but not least, the rising political risks that lie ahead with the contentious presidential election.

The death of Supreme Court Justice Ruth Bader Ginsburg has shifted the Senate’s focus to swift confirmation hearings of President Trump’s chosen replacement, Amy Coney Barrett.

The upcoming battle over the Supreme Court appointment ahead of the November 3rd presidential election is decreasing the odds that Congress will pass another fiscal stimulus package to support the ailing U.S. economy.

Beyond the Supreme Court battle, this week ushers in the first scheduled debate between President Trump and Democratic candidate Joe Biden. You can watch that debate at 9:00 pm ET on Tuesday evening.

Tensions Are Heating Up

Last week, President Trump declined to commit to a peaceful transfer of power if he loses the November 3rd presidential election, the Associated Press and other news outlets reported.

While the temperatures outside are dropping in much of the country as fall begins to take hold, the internal temperature of the country is rising.

America cities are already on edge after protests this summer.

Facebook CEO, Mark Zuckerberg, has warned there may be civil unrest and violence after the presidential election. Other experts and law enforcement officials are also warning about this possibility, as covered in a recent Time article.

Gold Breaks Down

Gold sold off last week, breaking down below the $1,900 an ounce level. The sharp jump in the U.S. dollar index was the primary factor pressing gold lower. Gold is priced in U.S. dollars and a rising dollar typically pressures gold lower. In general, this is viewed by analysts as a short-lived decline in gold.

“Further gold price weakness is possible, but U.S. election uncertainties will likely intensify and the Fed will ultimately need to expand policy. Hence, we maintain our positive view on gold,” the UBS analysts wrote in a research note to clients last week.

Also, economist Stephen Roach told CNBC last week that the US dollar is vulnerable to a crash next year and he sees double dip recession odds above 50%. He is the former chairman of Morgan Stanley Asia. Roach points to the “net national savings rate” which has turned negative in the United States as an indication the U.S. dollar must adjust sharply lower.

Jobless Claims Remain High

Over a million Americans filed for initial jobless claims in the week ending September 19th, with initial claims climbing 870,000 plus an additional 630,000 self-employed workers filing for benefits through a separate Pandemic Unemployment Assistance program. These are stunning losses in the labor market nine months after the COVID-19 virus first shut down our economy.

The stock market is registering its concern that the recovery is in trouble – and the economy isn’t out of the woods yet.

A Big Week Ahead…

In addition to this week’s presidential debate, investors will be watching for key economic data on Friday – the September non-farm employment report is slated for release. This marks the last major labor market update before the November 3rd elections.

We are heading into what could be the most turbulent election in modern history. The case for owning precious metals has never been stronger. We are seeing many clients increase their holdings of silver and gold heading into this election cycle.

Last week’s drop in gold offers you the opportunity to own more gold at a lower price – if you act now. Check out the current gold price here.

Stay safe. Until next week…

Regards,

David

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