Speaker 1Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the hosts and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only. Hey everyone, it's Tuesday, 3rd of November, 2026. It is election day in the U.S., although us here in CET time in Europe, we won't be getting the results until well after midnight. I think some of the polls close in Kentucky and maybe part of Indiana or something like that at midnight our time. Otherwise, the big states closing at 1 o'clock, starting with I think it's Florida and Virginia, the first really big states to do so. Not all of Florida, by the way. 1.30, we've got North Carolina and Ohio and then 2 o'clock. A bunch of other states, including Texas and others. And super curious to see how this turns out. It's always tricky because some states are pretty quick to tally the results. Some cannot even touch the, for example, mail-in votes until after the polls are closed. Others are able to open those up and tally them as they come in. So it's always confusing. And then some districts that report late are maybe urban districts where they're overwhelmingly Democratic, etc. But it will take a while. It will take a while to get a sense of the actual result, but I think you'll get a sense of the tilt. Somewhere around 2 in the morning or not long thereafter, I would say, especially with that Florida vote. If our memory serves, Florida's pretty quick to tally votes. It's kind of interesting here over the last several days here heading into the election, the voting odds, the noise continues to tilt ever more aggressively in favor of a blue wave scenario, even being called a blue tsunami scenario by Nate Silver. Who has a little bit of a patchy reputation sometimes, over-reliant on some of the polling that has been troublesome. I recall being really annoyed with him in 2024, although supposedly his record is still reasonably solid. And again, the problem is, what is the sense of the polling? I do believe, though, a reasonable blue wave scenario is or should be the base case scenario, given this feels like a referendum on Trump, given those voter concerns that are uppermost, including cost of living. And government corruption. I'll put a link in today's podcast episode description to an FT article, a basic article along those lines. Donald Trump's imperial presidency faces a popular uprising. And it talks about him using sort of one of his last major speeches. I think he did it in front of the reflecting pool there in the Capitol. Spent 22 minutes complaining about all this business about the algae and the green water, whatever. Trump whining about things that he feel have have worn on his image, this sort of narcissistic issue he has. And the article says it was, quote, another Captain Queeg moment, unquote. That is a throwback to for a generation even prior to mine. I'm not a young person. So if you're not familiar with what a Captain Queeg moment is, I will have a good link to a film for you. Also originally a book, actually, by Herman Wolk on a. Yeah. Humphrey Bogart film. Wonderful film, by the way. This Captain Queeg character. Now I should get back to what is what does it mean a blue wave result? What does it mean a blue tsunami results? I'll give maybe three ranges here for both the Senate and the House. A base case scenario, a sort of the polls have overrated the tilt here for Democrats and then one that's like the proper blue blue wave slash blue tsunami scenario. So I think the base case for for the Senate to me looks like about 52 to 53. I think it's between 51, 47. The Dems could take control, that is, and 52, 48. The Dems take control. Remember, we're at 47, 53 in terms of Dems versus Republicans now. So that that that 51 is sort of the minimal needed for the Dems to get control. I think that's that's really conservative to only see the four seats flip. So I think that 51 definitely would be the the polls are overestimating the Democrats chances. There have been some key race where something has been gotten wrong in that polling and the expectations base case. Five seats flip. And I think the blue wave scenario already starts basically that 52, but really increases above that because you're starting to tilt states like Kansas even on the 52 and Iowa on the 53. So keep those in mind. And if it's beyond that, I mean, we're talking about almost unimaginable levels of a wipeout for Trump because then you have to get into races like South Carolina and Nebraska very, very heavily Trump tilting traditionally over the last few elections. So if you're going to get into races like South Carolina and Nebraska very, very heavily, then you're going to have to get into races like South Carolina and Nebraska very, very heavily. So if you're going to get into races like South Carolina and Nebraska very, very heavily. A little bit below that, but it's super hard to imagine given that the tilt looks so heavy that we don't get a Democratic win. So let's say 225 to 210 is something really wrong with the polling. And the blue wave is up where actually Cal State is already at and even beyond. So we're talking about 240 to 195. That is a wipeout for the Republicans if that happens. So base case 230, a wipeout 240. Maybe somewhere in between is where I would sit as a sort of compromise. I'll buy into some of the blue wave and not the full blue wave. I'm really not sure. I've been off on the last couple of elections. But it does feel like the tilt is pretty heavy for the Dems here. All right, before I dive into sort of the review of yesterday's action, which, again, was super interesting along the lines of our classic, of late classic at least, market divergences. Internal is not looking like what the service is telling us. I want to say something. I wanted to go into this notion, as I discussed yesterday and had that discussion internally as well, about it's the midterms. Midterms historically have been a great time to buy stocks. That's the conventional wisdom. That's what the statistics will tell you if you just look at an average of really what I feel is a random market or set of market events over the last, let's call it, 60 years since or 70 years even. Sorry, 80 years since the midterm election in 1946. And some of these events have been going on for a long time. Some of these averages I have actually don't include that 46 election. But there are a couple of things, to me, emerge from looking at the historical record. A, a lot of midterm elections have come right in the middle of, coincidentally, I would argue, some really horrific bear markets. Let's start with 2022. a really bad market dump on the massive tightening that we had seen in the market from a tightening of interest rate policy by the Fed to get ahead of inflation. So markets were in a bad place right at that election. 2002, notoriously, that was towards the end of the huge post-tech bubble bear market. You had even 1990 was very bad. There was a little recession around there. And then there's some really horrific ones back in the 70s, especially 1974. It was 38% down from its highs over the prior four years since the prior midterms. In 1962, it was 22% down from the highs of the prior four years. 2010 even was 25% down from the highs of the prior four years. So we've had some elections that have come after quite some extensive drawdowns. Now, that doesn't have to mean anything. And actually, the historical record shows that even if you take that into consideration, the post midterms action has been reasonable. I would just argue it feels like a bit of a random walk. And here's the one thing, and it's such a tiny statistical observation or list that, you know, what are you supposed to do with it? You could say that it's interesting that we are going into this election with – and this is all S&P 500, by the way, these statistics. The last two years' performance in the S&P 500 has been up 33%. The last four years' performance has been up 96%. And this is as of the end of October versus the four years prior. There's only one other four-year period as demarcated by the end of October at a midterm election that has seen a better performance. That was in 1998, where we were up 56% over the last two years and plus 132.6% over the last four years. Roll forward, how did the next four years go? we are down 19.38% into 2002, if you include the entire four-year period. So in other words, your expected returns might be a little bit worse when you're starting from such staggeringly high performance over prior years. That would be my main warning. And secondarily, it feels like a very random walk. So I wouldn't use the midterms of the political cycle as being very indicative of where the markets might head. All right, let's get to what yesterday did bring, and we were, you know, once again had negative vibes in the tech sector, with the most interesting thing being is that we had a tremendous comeback attempt intraday on a huge fall in crude oil prices. We were down over $8 at one point per barrel of crude on the Brent contract, $105 and even below at one point. We've rebounded a little bit today, but nothing like the size of the decline. There's tons of noise, supposedly from some Iranian officials, that they're willing to talk. A lot of the U.S. side is making the same types of noises. I know absolutely nothing about what to do with that information. Can it be reliable? How many times have we heard this? The fact of the matter is, this all remains very much unresolved. And there's this idea being thrown around by a number of people. I passed one of these along yesterday, something that seems totally inconceivable to consider, but supposedly something that's circulating to some degree, the idea of a nuclear strike, a so-called tactical nuclear strike, that is. And I dismissed that idea yesterday in terms of doing an atmospheric nuclear device, A, because it's too controversial, the spread of radiation, et cetera, but also B, because it's just not designed for purpose. You get a massive blast, but it's not a directional blast designed to destroy something that's deep underground. Which means if they are going to use a nuclear device, they're going to use a something nuclear tactical that is effective. They would have to actually do some kind of commando operation to insert themselves in the country. Who knows they could use some of these disruptive weapons that were used in the attack on Venezuela to extract the president there. These apparently acoustic weapons, the disabled personnel and electronic interference weapons that would disable the ability of the enemy to communicate in the theater of the operation, insert some device, maybe even capture the material. I don't know. I think that's the only type of operation I can conceive of that could involve either a tactical nuclear or a conventional device in country. It doesn't seem like these sort of multiple bunker buster bombs are the trick for that nuclear material. If that extraction or destruction or turnover of the nuclear material is the key for whether this aggression against Iran ends. I don't know. Obviously, I don't know. But I'm just not willing to, you know, I'm certainly willing to hope that something will come of talks, but not willing to believe in that until quite some time has passed. Why did they evacuate US personnel, diplomatic personnel and otherwise from the region, etc. Just we need to see how this turns out, folks. And we need to keep all options and conceivable scenarios in play just for further resumption of hostilities. All right, enough of that. Let's park that. We're 12 minutes and we need to talk about yesterday's action. Once again, characterized by these massive internal divergences with the along the lines of what we talked about in the October performance review where tech and telecom mag seven semiconductors, etc. Had a horrific October, the broader market having a stellar October outside of those sectors almost without exception. NASDAQ 100 down 1.39% yesterday, right closing on the cash that is right at the 200 day moving average. We saw that pump and then a retreat mid day. The pump was on that big drop in crude oil prices. And super interesting that, you know, a drop of that scale did not inspire or did not see the market able to stick the landing by the end of the day, but spooky really that this was not able to support the market more profoundly. S&P 500 down half a percent, but the S&P 500 equal weight up almost three quarters of a percent only 1.5% even less than that. Slightly less than that. Only 1.5% off of its all time high. Russell 2000 was slightly below flat. The semiconductor index down over 3%. Nikkei was down slightly. It cost me down a heck of a lot on that probably on that socks result there. And Europe was caught in the crossfire up yesterday because the US market was in good shape near the European close and then dumping a little bit badly this morning with the risk sentiment a little bit more on the defense side. There was a super interesting the two very worst performers I should note on the S&P 500. And I think this is one of the reasons that tech was down more broadly were Lumentum down minus 18.6% and Marvel, the semiconductor maker down minus 12.7%. And again, worst two performers on the S&P 500. This was about a merger deal that Marvel had sort of pieced together sometime back when its stock was much higher in which Lumentum shareholders were getting four and a half times Marvel's share price. So what you're seeing is that as Marvel drops, it's making the deal worth less and less by the moment. Kind of an odd one. I was I saw that there was some kind of deal and I ran over to the Lumentum was doing and it was down. And then you read the details and you realize what's going on here. So there's something about this deal might not be consummated until way into 2028. I'm not sure I don't have any details beyond what I just said there. But not a good look that that this deal was resulted in that kind of price action. And the two big ones reporting yesterday, we both got a negative spin in the wake of those results, especially Palantir reporting as amazing 96% year on year advance yet another in this amazing consecutive streak of accelerating revenue growth. Absolutely nothing wrong with the quarter but their growth indicating or their growth outlook indicating a considerable slowdown, even though it's going to be quite still heavily or quickly growing company. Maybe some of the AI spend coming down at least in their view so that that played poorly was down I believe it was down over 7% in the aftermarket and we had Apple also down a little bit minus 2.3%. Again, this company has been advancing on this whole with the negative play of AI lately and the fact that Apple's not doing all the spending it's really benefited from that executed very well and nice growth numbers for the quarter. But again, it has this huge rally already in the bag. It's focusing and concerned about margins because of the unprecedented high memory costs. It's China business is certainly a black spot on the otherwise good situation here. And then this this duo sold out a good sign of demand, but I'm not sure how many units that I'm not sure it was shipping and super significant volume, but it certainly they're adding a new product here that could encourage some kind of upgrade cycle if there's a significant percentage of Apple, you know, the incumbent Apple users out there that want to upgrade to such a device. I know I'm looking at a foldable device for my next mobile maybe sometime next year. There was also this interesting NVIDIA headline that they're going to require that they're, I guess, those cloud providers that are installing significant portions or percentage of NVIDIA equipment in them will have to reduce their China exposure at their data centers. Super interesting headline there. Now on earnings front today, we've got AMD and Shopify and tomorrow we've got Novo just the highlights of the highlights. There's lots more going on. A decent amount of action over in the FX space, not so much with the dollar keeping its cards close to its chest on what direction it's going to take. There was a little bit of a sell off with the with the correction and crude, but then as risk sentiment crumbled, the dollar kind of came back a little bit, but there's just nothing convincing. I'm wondering what the market is really going on with the US dollar here at the moment. I think it's eventual weakening, but from some unknown level will coincide with wherever we get the great next easing. And I've got a couple of links for you on that front that I'll highlight towards the end of today's pod. But otherwise, there were a bit of action elsewhere we had. Well, we did the ISM for the US yesterday. It was stronger than expected. ISM manufacturing that is 55 and a half versus 54 and a half expected in the 54 and a half prior. Didn't seem to generate much price action. More interesting was the was the Swiss franc this morning, you know, rallying, extending its rally quite aggressively versus the euro on the US dollar. It's CPI release, just the latest excuse. And, you know, trade that was kind of already happening. Reporting that CPI 0.2 on month on month and 1.5, both above expectations, even though the core came in at half a percent year on year as expected. So Swiss franc doing very well, the Aussie and not doing so well, the RBA did sort of perform a little bit like the the market's expectations, which was expecting this height to be at least have good odds of being a final hike for now, at least in the cycle. But it was still read as a dovish hike, this RBA hike, there was a vote of six to three with three dissenters wanting no hike. The growth forecasts were lowered a bit, the unemployment rate was raised a little bit. And Governor Bullock was really reluctant to sort of guide for any further tightening saying stuff about data dependency, etc. So Aussie getting a little bit of a smack there, but not not a huge one. Back a bit lower below zero spot 75. Versus the dollar. And which kind of makes sense. We've seen metal prices under pressure as well. And Aussie Kiwi, looking for that full reversal. It's kind of there, but not quite. But it traded down towards 124. This was after that big sprint higher to 126 on the RBNZ skipping on their rate hike. By the way, I talked about the metals there. It's super interesting to see the pressure on that space. With silver trading below 49 bucks an ounce at times this morning, and gold, you know, getting close to challenging that the local low there below 3900. So keeping an eye on that technically looks awful. It just doesn't look like it wants to stage a recovery just yet. Technically, I need to see something before I can suggest that, you know, we could be building some kind of new base that's just not there yet. All right, and I guess I'll round out things with a few links. Should you have the time to read them in today's podcast episode description. There's thoughtful money out interviewing this guy, Larry Lepard. I think he just It just talks a good base case for sort of where the policy takes us in the next big crisis the sort of the pro uh metals story which of course is a much more interesting in terms of expected return now that we've come returns i should say now that we've come down so far in prices uh saying things like look you know under bernanke we had a three trillion dollar uh rescue pal it required a five to six trillion dollar rescue what's the next one going to be seven to maybe even 12 uh trillion dollars uh otherwise uh and basically it'll be in response to a a debt crisis pretty kind of standard playbook and standard argument for all kinds of things i think to get a bit more creative uh or i should say to get more creative i think the bailout when it comes and it will come uh because the us treasury must be funded we're not going to have u.s defaults it will take different uh will take a different shape than it has in the past i've talked about this before but you can start to see the edges of what this might look like in something like the very log long craig tyndale substack post which i will pass a link to as well in the podcast episode description essentially talking about a massive revaluation higher in the u.s official gold holdings uh you know if we they're held on the books at 42 bucks an ounce and if they're revalued let's say to uh it's a five thousand dollars an ounce it's it's kind of it's kind of a it's twofold in one way you have something a real value that can be sort of monetized and then that monetization can be transferred by the fed to the treasury the treasury owns the gold but they can get the money by the the fed issuing something called a i think it's called a gold certificate or something like that to the treasury which then has let's say a trillion-ish uh dollars to spend even more if it's actually valued at that full 5 000 level i just mentioned and so then the treasury can spend that money they can spend it on buybacks they can spend it on a sovereign wealth fund uh whatever industrial policy priorities defense who name you name it at the end of the day it's money that's created out of thin air even though it's based on a real asset and then you have to go back to the till again with another evaluation to get more money and there's all kinds of ways this this sort of soft links potentially the us dollar to to gold but in other ways it's just kind of a fiction you're really just creating money out of thin air it starts to resemble uh so-called omf which is overt monetary financing which is essentially proper simply printing money instead of issuing treasuries to create the money to to spend you just print the money so you know you have the larry lapard approach which is a bit more sort of expecting more or less standard level qe but i think qe could be an element of what's going on but it's these other more creative ways of doing things uh that have different implications and quite financially repressive ones if you start getting into things like not paying uh interest on bank reserves and maybe forcing uh you know savings into treasuries i'm not sure how much tyndale mentions in this piece i didn't read the entire thing but the whole bit on gold and the revaluation of gold is in the tyndale piece uh some stuff we really need to think about well i'm sure we'll be talking about this time and time again uh once and if the ai bubble collapses and uh the next recession is incoming and markets on the defensive and the u.s treasury needs to stay funded all these all of the above there will be new massive policy responses to keep the whole thing moving forward uh then there's the little uh nate silver blue tsunami piece i'll link to that if you're interested in following up on that as last minute political uh articles ahead of the elections themselves and then there's a super interesting one if you're wondering what's going on in poland uh i just think it's it's always the these countries that just operate in a different way from from other countries it's kind of interesting to read about what actually is going on and i think this craig murray piece does a decent job of of filling us in and making it understandable what this polish crisis is all about uh he mentions mentioning color in there as well about poland really being tired of the corruption and presence of ukrainian ukrainians in poland uh some anecdotal stuff about uh you know some rich ukrainians being the top buyers of high-end property in poland that's a bit hard for you to wrap your head around when you're seeing a ukraine that is under such massive and existential pressure that there's so much corruption going on that that could be the case so uh yeah that is it for today's podcast can't wait to see how these midterms take shape in terms of the results how big is the blue wave and what are the implications is how much of a fight does the trump administration put up as it sees the overwhelming potentially overwhelming results against it uh a lot of egg on the face there if so and i'll see you next time bye bye and um if there's one thing trump does not like on his face it is egg so we'll see what that looks like there will be a lot to discuss in tomorrow's podcast as these uh as these results are coming in uh we'll see stay careful out there and i'll be back tomorrow with the next saxo market call this has been the saxo market call podcast thanks for joining today's episode we're always happy for your feedback and questions of all kinds to reach out you can drop us an email at marketcall at saxobank.com that's marketcall saxobank.com saxo serious trading worldwide you can find us on our website at marketcall.com and you can find us on our website at marketcall.com
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