Election Day Jitters

Today’s the day; election day is upon us. Both candidates – former President Trump and Vice President Harris – held opposing rallies into the night in a last round effort to drum up support and motivate constituents to head to the polls. According to reports, as Americans head out to vote today, the two candidates are in a dead heat both nationally and across the seven key swing states (Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin). 

Of course, the battle for victory is not just about who will win the presidential race but the makeup of Congress as well, with a number of key policy initiatives included in several state ballots from legalized marijuana to homelessness services to rent control to abortion. 

Investors are bracing for a long and volatile day. Yesterday, stocks closed down with the S&P 500 falling 0.3% to 5,712.69. Meanwhile, the 10-year fell 10bps, closing at 4.29%. This morning, equity futures are in the green, while the 10-year is up 3bps at 4.32% as of 7:40 a.m. ET.

On the economic front, just hours after the polls close and the country is digesting the outcome of the election, the Fed begins its two-day policy meeting. Following an outsized 50bp cut in September, the Fed is widely expected to continue along a path to easier money policy albeit at a reduced pace with a more tempered pace of 25bps this week.

The September dot plot indicated the majority of officials see an additional 50bps in cuts this year and 100bps more next year, although nearly as many indicated a reduced forecast of just 25bps or no further cuts in the current year. With no updated release at the November meeting, market participants will be parsing through the statement and listening closely to the press conference for any indications as to what Fed officials are forecasting for the final policy meeting of the year and looking out further to 2025.

Aside from the Fed, yesterday, factory orders fell 0.5% in September, as expected and following a 0.8% decline the month prior. Excluding transportation, however, factory orders rose 0.1% at the end of the third quarter, the largest monthly gain since July.

 This morning, the U.S. trade deficit jumped 19.2% from $70.8b to $84.4b in September, the widest since early 2022. In the details of the report, the value of imports increased 3.0% to $352.31b, and exports fell 1.2% in September to $267.95b.

Later this morning, the ISM Services Index is expected to decline from 54.9 to 53.8 in October, remaining in positive territory but potentially marking a two-month low. 

Turning to Wednesday, weekly mortgage applications will be released, followed by the final October print of the S&P Global U.S. Services and Composite PMIs. 

Later in the week, on Thursday, weekly jobless claims, along with Q3 nonfarm productivity and unit labor costs reports, wholesale inventories, and consumer credit.

Finally, on Friday, we take a last look at the November University of Michigan Consumer Sentiment Index widely expected to increase from 70.5 to 71.0.

-Lindsey Piegza, Ph.D., Chief Economist