2022: U.S. midterm elections: Democratic upset in could roil markets, options strategists say | Canada News Media
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2022: U.S. midterm elections: Democratic upset in could roil markets, options strategists say

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2 years ago

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An unexpected result in Tuesday’s U.S. midterm election could roil markets positioned for relative calm, options strategists said.

Control of the U.S. Congress is at stake in Tuesday’s midterms, with Republicans favored by polls and betting markets to win control of the House of Representatives and possibly the Senate. With Democrat Joe Biden in the White House, that potential result would lead to a split government, an outcome seen as broadly favorable to markets over the long term.

But a surprise victory by the Democrats could throw the markets for a loop, potentially bringing to the fore concerns about tech-sector regulation as well as budget spending that could buoy already-high inflation, according to market participants.

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Analysts said a calendar full of closely watched macroeconomic events such as last week’s Federal Reserve meeting and U.S. consumer price data later this week have left traders less focused on the vote than might normally be the case.

With investors’ election-related hedging comparatively light, “any surprise would probably be exacerbated by thin markets and the relatively high volatility landscape that we are looking at right now,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.

Options positioning implied a 1.5% decline in the S&P 500 on the day after the vote should Democrats pull off a stronger-than-expected showing, according to Tom Borgen-Davis, head of equity research at options market making firm Optiver.

A “big Democratic win could be taken negatively for the tech sector just given they are more likely to bring in regulations in the sector, relative to Republicans,” Borgen-Davis said.

David Shribman: How economic worries could drive crucial women voters to the Republicans in the midterms

That said, options traders do not seem to be positioned for fireworks. For example, open puts on the Nasdaq 100-tracking PowerShares QQQ Trust’s options, typically used for defensive positioning, outnumber calls, usually employed for bullish wagers, 1.4-to-1, one of the smallest margins since mid-June, according to Trade Alert data.

Meanwhile, the Cboe Volatility index, known as Wall Street’s fear gauge, fell on Monday to close at a near two-month low. The SPX rose 0.96% but is still down 20% for the year.

Strategists at Morgan Stanley including Mike Wilson wrote on Monday that a Democratic win could send Treasury yields higher and strengthen the dollar, reflecting the view that higher fiscal spending could exacerbate inflation and force the Fed to raise rates higher than expected.

“Markets could assign a higher probability to further fiscal expansion, with Congress and the Fed effectively pulling in opposite directions on inflation,” Morgan Stanley’s analysts wrote.

On the other hand, a clean sweep by the Republicans could increase the chances of a Republican spending freeze, boosting Treasuries and supporting the most recent rebound in U.S. stocks, which has sputtered this month, according to Morgan Stanley.

At the individual stock level, certain names have the potential for higher election-related volatility, strategists at Goldman Sachs said in a note earlier this month.

For instance, revenue at iHeartMedia Inc Fox Corp , Paramount Global and Meta Platforms Inc could potentially get a short-term boost from ad-related spending around midterm elections, according to the report.

Meanwhile, shares of tobacco company Philip Morris International Inc could be volatile around regulatory restrictions, Goldman’s analysts wrote.

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Carry On Canadian Business. Carry On!

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7 hours ago

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October 22, 2024

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business to start in Canada

Human Resources Officers must be very busy these days what with the general turnover of employees in our retail and business sectors. It is hard enough to find skilled people let alone potential employees willing to be trained. Then after the training, a few weeks go by then they come to you and ask for a raise. You refuse as there simply is no excess money in the budget and away they fly to wherever they come from, trained but not willing to put in the time to achieve that wanted raise.

I have had potentials come in and we give them a test to see if they do indeed know how to weld, polish or work with wood. 2-10 we hire, and one of those is gone in a week or two. Ask that they want overtime, and their laughter leaving the building is loud and unsettling. Housing starts are doing well but way behind because those trades needed to finish a project simply don’t come to the site, with delay after delay. Some people’s attitudes are just too funny. A recent graduate from a Ivy League university came in for an interview. The position was mid-management potential, but when we told them a three month period was needed and then they would make the big bucks they disappeared as fast as they arrived.

Government agencies are really no help, sending us people unsuited or unwilling to carry out the jobs we offer. Handing money over to staffing firms whose referrals are weak and ineffectual. Perhaps with the Fall and Winter upon us, these folks will have to find work and stop playing on the golf course or cottaging away. Tried to hire new arrivals in Canada but it is truly difficult to find someone who has a real identity card and is approved to live and work here. Who do we hire? Several years ago my father’s firm was rocking and rolling with all sorts of work. It was a summer day when the immigration officers arrived and 30+ employees hit the bricks almost immediately. The investigation that followed had threats of fines thrown at us by the officials. Good thing we kept excellent records, photos and digital copies. We had to prove the illegal documents given to us were as good as the real McCoy.

Restauranteurs, builders, manufacturers, finishers, trades-based firms, and warehousing are all suspect in hiring illegals, yet that becomes secondary as Toronto increases its minimum wage again bringing our payroll up another $120,000. Survival in Canada’s financial and business sectors is questionable for many. Good luck Chuck!. at least your carbon tax refund check should be arriving soon.

Steven Kaszab
Bradford, Ontario
skaszab@yahoo.ca

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Imperial to cut prices in NWT community after low river prevented resupply by barges

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11 hours ago

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October 22, 2024

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NORMAN WELLS, N.W.T. – Imperial Oil says it will temporarily reduce its fuel prices in a Northwest Territories community that has seen costs skyrocket due to low water on the Mackenzie River forcing the cancellation of the summer barge resupply season.

Imperial says in a Facebook post it will cut the air transportation portion that’s included in its wholesale price in Norman Wells for diesel fuel, or heating oil, from $3.38 per litre to $1.69 per litre, starting Tuesday.

The air transportation increase, it further states, will be implemented over a longer period.

It says Imperial is closely monitoring how much fuel needs to be airlifted to the Norman Wells area to prevent runouts until the winter road season begins and supplies can be replenished.

Gasoline and heating fuel prices approached $5 a litre at the start of this month.

Norman Wells’ town council declared a local emergency on humanitarian grounds last week as some of its 700 residents said they were facing monthly fuel bills coming to more than $5,000.

“The wholesale price increase that Imperial has applied is strictly to cover the air transportation costs. There is no Imperial profit margin included on the wholesale price. Imperial does not set prices at the retail level,” Imperial’s statement on Monday said.

The statement further said Imperial is working closely with the Northwest Territories government on ways to help residents in the near term.

“Imperial Oil’s decision to lower the price of home heating fuel offers immediate relief to residents facing financial pressures. This step reflects a swift response by Imperial Oil to discussions with the GNWT and will help ease short-term financial burdens on residents,” Caroline Wawzonek, Deputy Premier and Minister of Finance and Infrastructure, said in a news release Monday.

Wawzonek also noted the Territories government has supported the community with implementation of a fund supporting businesses and communities impacted by barge cancellations. She said there have also been increases to the Senior Home Heating Subsidy in Norman Wells, and continued support for heating costs for eligible Income Assistance recipients.

Additionally, she said the government has donated $150,000 to the Norman Wells food bank.

In its declaration of a state of emergency, the town said the mayor and council recognized the recent hike in fuel prices has strained household budgets, raised transportation costs, and affected local businesses.

It added that for the next three months, water and sewer service fees will be waived for all residents and businesses.

This report by The Canadian Press was first published Oct. 21, 2024.

The Canadian Press. All rights reserved.

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U.S. vote has Canadian business leaders worried about protectionist policies: KPMG

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11 hours ago

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October 22, 2024

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TORONTO – A new report says many Canadian business leaders are worried about economic uncertainties related to the looming U.S. election.

The survey by KPMG in Canada of 735 small- and medium-sized businesses says 87 per cent fear the Canadian economy could become “collateral damage” from American protectionist policies that lead to less favourable trade deals and increased tariffs

It says that due to those concerns, 85 per cent of business leaders in Canada polled are reviewing their business strategies to prepare for a change in leadership.

The concerns are primarily being felt by larger Canadian companies and sectors that are highly integrated with the U.S. economy, such as manufacturing, automotive, transportation and warehousing, energy and natural resources, as well as technology, media and telecommunications.

Shaira Nanji, a KPMG Law partner in its tax practice, says the prospect of further changes to economic and trade policies in the U.S. means some Canadian firms will need to look for ways to mitigate added costs and take advantage of potential trade relief provisions to remain competitive.

Both presidential candidates have campaigned on protectionist policies that could cause uncertainty for Canadian trade, and whoever takes the White House will be in charge during the review of the United States-Mexico-Canada Agreement in 2026.

This report by The Canadian Press was first published Oct. 22, 2024.

The Canadian Press. All rights reserved.

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