CURRENT THINKING: Expecting powerful rotation to come into year-end

Market thoughts…plenty of competing factors at the moment ensure that there will be volatility into and out of the election. Fundamentally things are getting worse, freedom of movement is diminishing and the expectation of a linear improvement of Q4 over Q3 in many parts of the market looks optimistic.

But balancing that we have a Brexit process with a clear path to a deal now, that a deal looks more likely than not at this point. We are also likely to get vaccine read outs in the next 2 or 3 weeks, with local press suggesting hospitals in the UK should ready themselves before year end. And absent a contested election the markets should breath a sigh of relief whatever the outcome, though clearly what drives things post the election will depend on the various permutations; at this point everyone is fixated on the scale of the stimulus in a blue sweep, but IMO stimulus is likely in most scenarios, what they can’t get over the line now would be completed quickly should Trump pull a rabbit out of the hat, and a split congress would prevent Biden from enacting a lot of the taxation negatives he is planning.

With all that in mind there has been some interesting price action over the last week or two. Beat and raises from COVID winners have been sold (LOGN, HFG, JET, RB) and misses/warnings from the losers have been re-rated (AC, LHA, IAG).
It is possible that in November we have a Brexit resolution, positive vaccine data and a benign election outcome. Once Q4 numbers are in the right place we could be faced with a violent rotation into year end.