US Market Insights & Strategies (4-7 Nov): All Eyes on US Elections

• The $.SPX(.SPX)$ and $.IXIC(.IXIC)$ returned -1.35% and -1.55% last week, respectively.

• Major market movers include $NVIDIA Corp(NVDA)$ (-4.34%), $Microsoft(MSFT)$ (-4.15%), $Apple(AAPL)$ (-3.67%), $Eli Lilly(LLY)$ (-8.26%), $Tesla Motors(TSLA)$ (-7.51%), $Amazon.com(AMZN)$ (+5.38%), $Alphabet(GOOGL)$ (+3.64%), $Visa(V)$ (+3.20%), $Booking Holdings(BKNG)$ (+9.23%), and $Comcast(CMCSA)$ (+4.56%).

• Important economic events this week include:

Tuesday: Presidential Election, ISM Services PMI

Thursday: Unemployment Claims, FOMC Meeting

• Important earnings this week include $Palantir Technologies Inc.(PLTR)$ on Monday, $Novo-Nordisk A/S(NVO)$ , $Qualcomm(QCOM)$ , and $ARM Holdings Ltd(ARM)$ on Wednesday, and $Airbnb, Inc.(ABNB)$ and $Block(SQ)$ on Thursday.

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🎁Weekly Higher EPS Estimates: NVO, QCOM, ANET, MELI, PLTR & More

🎁Capturing Top 10 Ex_dividend: AMP, STZ, NVEC, LPG, PAYX...

Things You Should Know Before Starting Your Week:

1) It may take days to determine who wins the presidential election; if contested, it could take weeks.

• We may learn the winner of the US presidential election on November 6 (Singapore time), or we may know the outcome a few days later, like in the 2020 presidential election, which was announced four days after the November 3 election.

• If there is a contest over the vote, it could take a few more weeks to determine the winner.

• Who controls Congress matters too. In the 2020 presidential election, we only learned that the Democrats won both Georgia runoff elections—and control of the U.S. Senate—on January 6, 2021. The 2020 US election put the Democrats in control of the presidency and both houses of Congress, allowing Biden to carry out his policies more easily.

• According to Polymarket, a Trump/Republican sweep is still the consensus with 39% odds. The second highest odds, at 26%, are for a 'Harris win + Republican Senate + Democratic House,' while the third highest odds, at 17%, are for a Harris/Democrat sweep.

2) Big Tech Q3 Earnings mostly beat expectations, but worse guidance and higher CapEx spending dragged stocks lower.

• Most big tech Q3 earnings, such as AMD $Advanced Micro Devices(AMD)$ , Alphabet $Alphabet(GOOGL)$ , Microsoft, Meta, Amazon, and Intel, beat market expectations, but some big tech stocks like AMD, Microsoft, and Meta still fell due to worse-than-expected earnings guidance and a surge in CapEx.

• I still believe that all the Magnificent Seven stocks, except for Nvidia (which has not yet announced earnings), have delivered solid Q3 results.

• Nvidia $NVIDIA Corp(NVDA)$ is the major winner this earnings season, as most Magnificent Seven stocks, such as Alphabet, Amazon, and Meta, commit to incurring more CapEx in 2025, which will benefit chipmaker Nvidia, as it is expected to receive a large chunk of the increased CapEx. Nvidia may also see a boost in its share price as the company will replace Intel in the Dow Jones Industrial Average on November 8.

Source: Bloomberg, Tiger Brokers

3) November and December Seasonality and Share Buybacks May Propel US Stocks Higher to Close the Year

• Historically, US stocks tend to rise in November and December. Since 1999, the S&P 500 has averaged returns of 2.05% in November and 0.94% in December.

• According to Goldman Sachs, historical data shows that $100 billion in share buybacks occurred in November, with 21% of all buybacks announced throughout the year being executed in November and December.

• Additionally, November typically ranks as the third highest month for median fund flows into mutual funds and ETFs as a percentage of total assets under management (AUM).

Source: Bloomberg, 3 Nov 2024

Conclusion:

• Despite election uncertainties, I reckon the US economy is still in good shape, and investors should view any short-term dips as opportunities to accumulate and build a long-term portfolio.

• We may see a relief rally in the equity market once the US president is announced, regardless of who it is. Institutional and retail investors may have underinvested to avoid the election uncertainties, so they will likely scramble to reposition themselves.

• November and December will be the final chance for funds to catch up on performance relative to benchmarks. The S&P 500 and Nasdaq 100 have returned nearly 21% and 20%, respectively, thus far in 2024.

   

Trading/Investing Strategy:

• Buy Protective Put: If investors are concerned about short-term adverse movements in their stocks or portfolio due to election volatility, they can use a protective put strategy to limit potential losses.

• Wait for a Dip: A market dip can provide a good accumulation opportunity for building a long-term portfolio.

• Investing in Tranches: Investors may consider splitting a large investment into smaller amounts to invest at different times, helping to manage risk. For example, they might accumulate broad-based, diversified S&P 500 ETFs (such as SPY $SPDR S&P 500 ETF Trust(SPY)$ , VOO $Vanguard S&P 500 ETF(VOO)$ , VTI $Vanguard Total Stock Market ETF(VTI)$ ) and Nasdaq-100 ETFs (QQQ $Invesco QQQ(QQQ)$ ) using a dollar-cost averaging strategy.