Will the US Supreme Court nomination alter the election rhetoric?

Abraham George Macro View

When everything else was going down oil prices were up more than 11% last week. I am surprised the media didn’t make much of a noise about it. What was also surprising is that President Trump hosted the leaders of Bahrain, UAE and Israel to sign a peace treaty last Tuesday. The media didn’t find it important to give that much of a coverage.

Has the peace treaty anything to do with oil going up? May be. To the extent that it may have increased the probability of the fossil fuels industry. As we all know there is a global war against fossil fuels. And it’s a war the climate change activists are winning. They believe that climate change is an existential threat to the world. The supporters have unlimited funds to back their agenda. Because they view Trump as a climate change denier, they have clearly said he is an existential threat to the free world.

What does this all have to do with the Middle East deal? Think it is positive for the outlook and the survival of the fossil fuels industry. Does it increase the chances for Trump’s re-election? May be not directly, but it shouldn’t hurt him. It should also help his position against China with more Middle East support.

The death of Supreme Court judge Ruth Bader Ginsburg has created much more confusion in an already charged and acrimonious election season. Trump surely wants to nominate a replacement as early as next week but surely before the elections. There is a lot of speculation who it could be but there’s little doubt it will be a conservative judge and a female.

The Republicans hold a 53-47 majority in the senate, and with a confirmation requiring 51 yes votes , the result is already hanging in the balance. Republican senators Susan Collins and Lisa Murkowski have already indicated they won’t support a confirmation vote before the election. Don’t think Mitt Romney another senator who has been so critical of Trump want to do any favors for Trump unless senate leader Mitch McConnell can convince him otherwise. McConnell won’t take it to a vote unless he’s got his arithmetic right and certain that he will win. It is a political windfall for Trump , who has been desperately waiting for a shift in attention from the devastation brought on by the pandemic and state of the economy.

This should bring a new culture war to the forefront firing up the Evangelicals and Catholics, forgiving Trump for all his misdeeds, while pressing the nomination through before Nov 3 would throw petrol on the partisan fires that are literally burning on the streets. What is clearly on display is the hypocrisy of handling similar situations by McConnell, Graham and Biden from past incidents.

Equities

The S&P 500 made a new low on this string of down moves at 3292 on Friday from the high of 3588 which was made on Sep 02. The Nasdaq also made a new low for its decline. However the Dow did not make a new low. The intraday low was 27,488 which was marginally above the low of 27,447 made on Sep 10.

Despite the non- confirmation between the major three indexes the breadth indicators aligned with the down move. Of the 30 stocks that make up the Dow only 4 closed higher while 26 closed lower. The negative breadth was around 82 % in Dow and the S&P 500. In conjunction with quadruple witching total volume spiked to 14 bio shares traded , the highest volume traded since June 26.

The Dow is sitting on a strong support level which has been tested five times . A meaning full break of this level should take it down to 24,970 and the equivalent level in S&P 500 should be 3000-3050.

Bonds

Bonds are in a down trend as long as the top side is capped at 178^15. The internal subwaves have been very frustrating to keep up with. We are looking for a move down to 170 as long as top side remains contained.

Euro

Euro prices dropped below 1.1753 but quickly recovered. Euro is trading purely off some technical levels. It can make another attempt close to 1.1918 but a break below 1.1738 should encourage further falls. A move above 1.1966 will worry us.

Gold

Gold is on the cusp of significant move. There are arguments for a break out on both sides. Hope we will have some thing more clearer to say in tomorrow’s report.

Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.