As per JPM and Nomura   the mkt is pricing a Biden win, caution that a blue wave is necessary, otherwise will get gridlock.

Even if it happens probably get turmoil specially if we do not get clean sweep. Otherwise legal problems will be forthcoming. The groups would be HC, alternative energies, cyclical, education, infrastructure. Also China as frictions will be reduced

Can you identify possible winners, using the charts and share them?

Trust you and your family are well. Stay safe.

The narrative about who will win the US Presidential election has morphed over the last couple of weeks to pricing in a Biden victory. The catalyst for this change was the debate where the two candidates harangued each other and dropped the bar for political decorum another notch lower. Since then, confidence among Democrats has increased substantially. There has been talk of a double-digit margin of victory and a blue wave where they control both legislative branches and the Presidency.

After a week characterised by selling across the board, a great deal of profit taking has taken place and many overextensions relative to the trend mean have been unwound. The question I believe many people will be concerned with is whether the coronavirus is going to be the catalyst for an economic contraction? I thought it would therefore be worth monitoring the kinds of instruments that offer a lead indicator for that kind of concern.

Regarding the Allen Brooks piece on Climate change. I have to say I find the benign conclusions of the report totally unconvincing. Over the years I have read widely on the subject and have been especially impressed by the publications and books of one of the most eminent climate scientists whose work goes back more than 50 years. I refer to Professor James Lovelock. In a recent BBC interview, he suggested that global warming may be entering an acceleration phase. As I write this reply a news story has just announced that a high-pressure dome is due to affect the Eastern states of the US with predicted city temperatures likely to exceed 40 deg C. The simple fact is that you cannot expect hydrocarbons that have been trapped in the Earth’s crust over many millions of years, to be exploited by man over a few decades with the bye products going into the atmosphere, without grave consequences.to follow. Globally we have just experienced the hottest June ever and significantly Siberia has been 7 deg C above normal for the time of year. I mention this in respect of the melting permafrost which is now releasing methane in significant amounts. A gas thirty times more significant than CO2.as a greenhouse gas Of course this topic is an extremely emotional one, simply because the decisions made now on how we collectively proceed could not be more important. On balance I think I would go with the IPCC and James Lovelock. His books on Gaia theory, by the way, are worth reading

Thank you for this email which may be of interest to others. Higher median temperatures and more humid conditions in some areas than we are accustomed to are a fact. Coral bleaching and marine calcification are also facts we cannot dispel. Pollution of our rivers, lakes and oceans, desertification following logging and rapid expansion of cities to accommodate billions more people all represent significant challenges that need to be dealt with.

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If the USA’s increasingly powerful position as a swing producer of oil and gas is reducing the need for it to play the part of the global police force then what can we conclude from China launching its first domestically produced aircraft carrier this week?

It’s possible that if China’s coal consumption dramatically declines, India will be there to fill the hole. Macquarie estimates that by 2025, India’s Energy demand will rise 71 percent, with coal taking the lead among oil, gas, hydro, nuclear and others. The south Asian country is already the second-largest importer of thermal coal, and it might very well surpass China in the coming years. Macquarie writes:

Although all Energy use will rise [in India], coal is the major theme as consumption and local production are both set to almost double by 2025 on the back of large-scale coal power plant construction plans.

The group adds that, unlike China, India has no present interest in reigning in its use of coal. Most emerging markets, India included, recognize that coal is an extremely affordable and reliable source of Energy, necessary to drive economic growth.

Even if these predictions don’t come to fruition, the consensus is that we haven’t yet seen peak coal use in Asia. Estimates vary depending on the agency, but everyone seems to agree that demand in the medium-term will rise before it retreats. A 2014 MIT study even suggests that Chinese coal consumption could rise more than 70 percent between 2012 and 2040.

 

North America and Europe engage in a great deal of navel gazing when it comes to climate change and yet US emissions have been falling because of natural gas boom and the EU has seen aggregate emissions decline not least because of its sluggish economic recovery. The main future contributors to carbon emissions are the up and coming developing economies. If governments are truly interested in tackling the issue, doing everything possible to help China and India migrate from coal is in everyone’s interest. This is no small task because above all else coal is cheaper now than it has been in a decade. 

We are not convinced that the stock market needs higher commodity and oil prices in order to continue to rise. In our view, the shift in the direction of commodity prices since 2010 reflects a transfer of the benefits of higher commodity production from producers to consumers. That means basic industries and consumers should be the beneficiaries of falling commodity prices. Long-term, commodity prices should climb in response to increased consumption, which will drive up corporate earnings that are necessary to support higher share prices. A higher stock market can come without oil prices reaching new all-time highs, but they need to be higher than current levels for Energy company earnings to rebound, that is unless substantial operating costs can be removed from the Energy business. The Energy business may get both, and investors will benefit from increased share prices. Unfortunately, this isn’t likely until sometime in 2016.

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It strikes me as odd that anyone thinks you need a high oil price to support a bull market in equities outside the Energy sector. The stock market does not need high oil prices to rally but it does need the perception that the future will be better than the past to justify progressively higher prices. Admittedly this is often associated with higher Energy demand.

The concentration of revenues in the Energy sector that occurred as a result of the high Energy price environment is over. This has acted as an incentive for mergers. Consumers will be medium-term beneficiaries as Energy savings accrue and spending power improves. But what about the short term?