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Markets Update: Investor Sentiment Tilts Marginally Bullish and Pro-Cyclical

2020-10-09

Jason Mathews of Goldman Sachs’ Global Markets Division explains what the futures market indicates about investors’ outlook for the election and another round of U.S. fiscal stimulus. 

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
Welcome to our exchanges at Goldman Sachs Markets Update for Friday October. Ninth each week we check in the leader cross the firm to get a quick take out there watching in the market, objects. You global coverage mutations here, the firm enjoy today we have decent Matthews from our global its division. Jason welcome to the problem, drive me Jake. I really appreciate it suggests tell the listeners. Look at what you do heard firm, so they have some perspective. I do I sit equity derivative cells group. I focus on hedge funds and asset managers and basically just covering them for equity derivative sales. Ok, Jason. I've been talk a little bit about how markets react to some of the news that we see in this week has been extraordinary: weak outnumber France and just remind listeners. We normally special inside and the outcome of the election or not Necessarily strong institutional views on this matter, but we're talking about our clients, react
this news and how they trade in the markets. Based on that news, so Jason added markets react to the president testing positive for covered. That news broken Friday, weren't, you see in the futures markets that morning yeah sure walking into the office around seven. A m Friday is a pretty decent decline in Essen P. Without about a hundred and seventy five basis, points NASDAQ was down about two hundred and thirty basis points, but there was no a ton of information given at that time, my first observation- was that there was no panic with our client base and if you'd keep in mind that raising other leaders in the past contract a virus with worse Johnson in UK, and I think your people just needed a little bit more information. So I think the main client take away earlier on, is it with you? This is just another level of uncertainty around Let your process pulls the first debate, the big
market concern was that of a contested election. So many felt that this positive test really should have added to that probability drew up a narrative, your basically changed. People looked at trumps positive announcement along the headline, miss or not, payrolls earlier that morning, and people got excited because they thought hey this be another reason that we get a pre election stimulus package pass, so any and you're the market traded up from the loaves closed out about eighty five basis. Points at the was overall. Hygiene in Europe, given the news guess or our research seemed so ruled out a stimulus package three weeks back, but the market seems to keep pricing. You know that possibility back in how's. The market reaction changed over the past week present was obviously hospitalized. I was back at the White House discharged and obviously there's been a lot of news out of the White House, but others The positive has market just taken demonstrators. There continue to be smooth
yeah. I think in general. I think March drapery well Monday. the comment. We get a big out back on the news that you're he's going, turned to the White House, TAT night, Tuesday we trade lower and that simply because other perceive halt and stimulus talks between pelusium minutiae Wednesday. We bounced back again with and out that there still so the negotiating specifically about the airlines, but there still talking, which is encouraging, and today, we trade higher again you're, really think the last couple of weeks we seen the meaningful shit and centre. With the investing community I'd personal characterize, it is just marginally bullish with like a pro cyclical till other overarching deems that consensus. It just bearish on host election imply volatility. Given the current innovation in projects to put that perspective for you right now,
Es Mp from the implacable market is saying that, every day from now to the end of the year, the Essen he's gonna move two percent a day. That's an unnamed second percentage of the land twenty year, so a pretty big earlier. So there's been a lot of people trying to game out what that November for through the end of the year might look like. Also two people trying to sort out the timing of the stimulus packages, pre election post election the latest on, if and when investors expect that happen you're, so I think you know specific distant, most there's optimism that it gets done. Selection out. Nobody has a specific day or times just post election and, I think, No, you can really see where this optimism is be reflected because his driving, so the cyclical and value areas higher, I mean you know clearly happens. Your election night, the Senate matters a lot, but if you look at
sectors like regional banks. There are over ten percent in the month of October retail eight percent. twenty one October and small cat also of eight percent during the month. So I'm focused, as was our climate. The poor. Folks on these sectors are really correlated just in this new expectations. I think these are beyond everybody's radar before so The FED chairman speaks markets, listen venture out this week. J Pal spoken urge more stimulus reserves, especially for the fiscal stimulus, can't really overdo. It is feeling amongst investors that might influence that kind of hers, federal response we see or or not so much yeah Jake you, best like whenever you get a clear message from the FED its impact for in. Reaction to what he said was just positive overall If you look at him calling for more fiscal action alongside the current accommodative, monetary stance is
a powerful cartier, with his exact words too little support it- would lead to a weak recovery, the risk of overdue, Well, it seems small. This really shapes or should help the overall macro set up. I spoke to a few Clyde specifically, and they can ambition and now come where you have a back, see you get a significant fiscal boo post election and stays where they are in terms of being accommodated if you think about it, it's like the pandemic gets ensure with the vaccine, but the power she's associated with the pandemic are still place pretty power beyond that. What's another thing that markets are watching in the weeks ahead, still the election, but there are other things go round. World yeah it is pretty interesting. You're. A lot of people are really focused on positioning posts, the event post election and I think it is fair to say in the next two to three months we will have a clear, decisive winner of the election as well as a lot more information about the vaccine in so why
Being that really keeps coming up is that it is really interesting, is just emerging market upside, if imagine a scenario in some investors are where you get a bad and victor and a vaccine. What does it look like or how to markets react that you had better? longer global growth You have a lower. U S, dollar higher! taxes in the U S at the tent. We better foreign policy, specifically China. I can't think What better set up for emerging markets to outperform? That's all my radar, we start to see people focused on buying merge market upside, so I think that's a real focus origin. And always great to talk to you in and hear your perspective on how Clyde's reviewing these things thanks for joints land to be here. Thank you very much. So that's all for this week's markets update
on exchange the Goldman Sachs in case you, MR check out or other up so this week with MIKE Moran of Goldman Sachs Asset Management, who talked about the impact of covert on retirement plans in how investors go from here. Thanks for listening- and we hope you have a great weekend- this broadcasters recorded on Thursday afternoon October. thousand twenty actual is all price references and market forecasts correspond to the date of this recording. This podcast should not be copied distributed, published or reproduced in whole or in part. The information contained in this package does not constitute research or recommendation from any Goldman Sachs Entity to the listener. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty as to the
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Transcript generated on 2021-07-01.