Maybe the bar-stool bettors were right all along. Stocks just go up.
Expectations for additional fiscal stimulus helped lift the major U.S. averages about 4% in the latest week, bringing them within about 3% of their early-September peaks. But the bullish narrative also suggested that the V-shape economic recovery was sufficiently robust to continue to lift the market, even without further fiscal actions.
If that sounds vaguely familiar, think back to around 2010 and the debate over monetary policy. If the economy stumbles, the Federal Reserve will ease and stocks will go up, the thinking went then. And if the economy is doing well enough not to need a lift from the Fed, stocks go up.
The prospects for the Nov. 3 elections similarly are seen as a plus for stocks. Increasing odds in public-opinion polls and betting markets of a so-called Blue Wave, with Democrats winning the White House and the Senate, while retaining control of the House of Representatives, were viewed as bullish. That’s a reversal of the previous perception that President Donald Trump and a GOP Senate were better for business.
Of course, nobody has forgotten that, at this time four years ago, the polls and betting markets confidently were predicting that Hillary Clinton would cruise to an easy victory. And a lot can still happen in the next 3½ weeks.
The increased chances of a decisive outcome in next month’s vote substantially reduced fears of a prolonged postelection fight while counting what will be a mountain of mailed-in ballots. Similarly, some sort of fiscal largess from Washington was expected, albeit probably not before Election Day, after Trump reversed his opposition to negotiations