The local stock market was well and truly ‘trumped’ this week and it could be a prelude to what happens on Wednesday (and for some time after that) if Donald becomes the 45^th President of the United States of America. In my weirdest and wildest dreams I never contemplated writing such a thing, except in comedy and satire! That said, all of us have grown up with: “Only in America.”

Overnight, US jobs trumped the Trump fear and loathing with stock market indexes up, after eight days of being locked in the red. And here’s something I missed: the Russell 2000 index was off 10% from its all-time high in June though it’s not all linked to the Donald drama, with experts arguing that the prospect of interest rates rising in December has undermined confidence in small cap stocks in the Russell index.

To the jobs report and 161,000 jobs showed up in October and this compares pretty well to the 175,000 that the Reuters poll of forecasters guessed. Unemployment remained at a low 4.9% but the good news for a world afraid of deflation and praying for inflation was that average hourly earnings spiked 2.8% on an annualized basis.

“This is a pretty positive wages picture and it’s what you’d expect to see with such low unemployment,” said Andrew Chamberlain, chief economist at Glassdoor. (CNBC) And this is a sound economic observation.

It’s a good sign that solid jobs and wages data aren’t spooking the stock market, as it all says “get ready for a rate rise in December”. However it is possible that some players could be gambling that a Trump victory next Tuesday could easily keep the Fed on hold, especially if the share market has a post-Brexit reaction, which I’d expect.

Now let’s head home to see what damage ‘Hurricane Donald’ has done for stocks this week. By the way, this is the third straight week of losses and I have to add that OPEC and their rival oil producers haven’t helped, with talk of tensions hitting the oil price. However, it’s still mainly Trump trumping stocks.

In case you stopped counting, the S&P/ASX 200 index was down 0.9% on Friday and 1.95% for the week but I don’t like that we finished below 5200 at 5180 because it makes me feel that gravity still has some pull on the index.

Donald has been good for gold but we tipped this. We didn’t tip that the FBI would remind us of how hopeless Hillary’s emailing is!

This US election means more for stock players than ever before, at least in my lifetime. And that’s because Donald Trump defies the characteristics of a typical politician and his revealed economic policies are outside the political square. We’re stuck with this volatility until the election results come through but if he wins, there’ll be a big slide and a big buying opportunity. The biggest challenge will be working out when you should get in but there will be some worrisome days, until the market works out how low it wants to go.

I really hope I don’t have to hold your hand through an experience like this, though I’m not sure that I won’t have to.

‘God bless America!’

What I liked

• Moody’s Analytics has called the US election correctly since Ronald Reagan and it gives the election to Hillary in a landslide!
• Atlanta Fed President Dennis Lockhart said Fed rate hikes over the next two years would be very gradual – this is a message that has to get through to the market or else there could be overreactions in both stock and bond markets, with terrible implications for the economy.
• OPEC’s secretary general said Saudi Arabia and Iran weren’t again at loggerheads so the chance of an output deal later in December is still possible. A slump in oil prices won’t be good for stocks.
• The pound surging on a High Court ruling that might make Brexit harder to pull off, as it needs parliamentary approval. So a stock like CYBG actually surged 7.1%, which shows how crazy markets are in the era of Brexit and Donald Trump. The wall of worry is never a dull place.
• Chinese iron ore futures climbed to their strongest level in more than two years on Friday, reflecting firm demand for the steel-making raw material, as steel prices stretched gains (along with coal) to multi-year highs. (SMH) This is good for Queensland, WA, the country’s economic growth and the Budget’s bottom line. Let’s hope this higher commodity price story is sustained.
• Retail rose by 0.6% in September, to be up 3.3% over the year – a 4-month high.
• Our trade deficit narrowed from $1,894 million in August to $1,227 million in September – the smallest trade deficit in 21 months.
• The ISM manufacturing index rose from 51.5 to 51.9 in October (forecast 51.7).
• The ISM non-manufacturing index fell 2.3 points to 54.8 in October but it’s still a good result.
• US factory orders rose by 0.3% in September, while the August result was revised up from 0.2% to 0.4%.
• US non-farm productivity rose at a encouraging 3.1% annual rate in the third quarter – the fastest pace in two years.
• The ADP employment index shows that private sector payrolls rose by 147,000 in October (forecast +165,000) but the September job gain was revised up from 154,000 to 202,000!
• US new vehicle sales rose from 17.76 million to 18.29 million in October (forecast 17.5 million).
• The price of thermal coal rose 6.9% to US$105.45 overnight and on Chinese markets, the coking coal price lifted 7% on Tuesday to 1,342 yuan per US dollar.
• No rate cut on Tuesday and the likelihood that the economy is poised to be good enough to rule out any more cuts. I hope that both the RBA and P. Switzer are right on this but an external curve ball could come from left field, tossed by one President Donald Trump!
• The Performance of Manufacturing index rose by 1.1 points to 50.9 in October. A reading above 50.0 indicates that the sector is expanding.
• In China, the purchasing managers index for manufacturing rose from 50.4 to 51.2 in October; the services gauge rose from 53.7 to 54.0 in October. (If you can trust the Statistician, these are good numbers for Chinese growth and that’s good for us.)
• Dr John Hewson admitting on my TV show that he reads this report every Saturday! And he noted that my optimism really shows, with my ‘what I liked’ always outnumbering my ‘what I didn’t like’. When the opposite happens and starts to look like a trend, that’s when my optimism will turn to pessimism. I promise all of you that.

What I didn’t like

• Sam Stovall of CFRA Research (who I interviewed a couple of years ago when I took my TV show to Wall Street) revealed what Hillary Clinton has to beat: “Going back to World War II, the S&P 500 performance between July 31 and October 31 has accurately predicted a challenger victory 86% of the time when the stock market performance has been negative.” The market’s slide over that time is not good news for Hillary and investors!Over that time, the US market is down a tick over 2%, so a great Friday and bull-driving Monday could KO this bad omen for Hillary. This shows how damaging that FBI emails stunt was late last week.
• The VIX or fear index was up 33% this week and it’s all Donald T’s fault, with the FBI an accessory.
• The UK’s Independent reports that 91% of bets received on the US election are for Trump.
• The RBA has reduced its upper range number for economic growth for 2018 from 4% to 3.5%. This is still a good number but I liked the bullishness of 4% so I hope the Bank lives to rue their chicken-hearted back down on the 4% guess!
• Dwelling approvals fell by 8.7% in September, dragged down by a 17.5% fall in apartments. (But the value of residential and commercial building approvals lifted to a record high of $11.8 billion.)
• The CoreLogic Home Value Index of capital city home prices rose by 0.5% in October and was up 7.5% over the year. Prices rose in all capital cities except Adelaide and Hobart. But regional prices were only up 1.1% in the year to September. (I think we need to see some house price cooling in Sydney and Melbourne but rises in Perth and Brisbane are good to see.)
• The Chicago purchasing managers index fell from 54.2 to 50.6 in October. The Dallas Federal Reserve manufacturing index lifted in October from minus 3.7 points to minus 1.5 points.
• The result of the Melbourne Cup!

What if Hillary wins?

Stocks will surge so if you’re a political expert (a faultless one), you’d go long on stocks on Tuesday but you’d have to be a punter!

Top stocks – how they fared

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The week in review

• I explained what the FBI emails on Hillary Clinton could mean for Donald Trump, and the stock market!
• James Dunn shared four companies doing some world-class work in stem cell research.
• Charlie Aitken said he’s “thumping the table” on Star Group, Link and APN Outdoor after heavy corrections.
• Roger Montgomery explained why Healthscope’s share price fall has presented an opportunity for long-term investors.
• Philip La Greca from Super Concepts shared some helpful tips for your SMSF investment strategy.
• Tony Featherstone said these US election jitters have created a buying opportunity for high-quality healthcare companies.
• Paul Rickard said NAB is in the buy zone.
• Barrie Dunstan explained why the new limits on pension accounts could add a layer of complexity for super fund members.
• The brokers placed Caltex on the upgrades list this week while Blackmores and Wesfarmers were downgraded.
• In our second broker report, Wesfarmers was among the upgrades while Woolworths was downgraded.
• Our Super Stock Selectors liked Blackmores, but were mixed on the banks.

What moved the market?

• Growing anxiety over a potential Donald Trump victory, with polls showing the race to the Whitehouse is tightening!
• The Fed hinting at a December rate hike.
• The falling oil price due to an increase in US stockpiles and scepticism towards OPEC’s planned output cap.

Calls of the week

• The US Fed kept the cash rate steady.
• ANZ completed its exit from Asia and said its Australian life insurance, advice and superannuation businesses could be next.
• Paul Rickard said NAB is a buy for income seekers.
• Charlie Aitken said ‘be brave’ and consider beaten up Australian growth stocks including Star Group, Link Group, and APN Outdoor.

The week ahead

Australia

• Monday November 7 – ANZ Job ads (October)
• Tuesday November 8 – Speech by Reserve Bank official
• Tuesday November 8 – NAB business survey (October)
• Tuesday November 8 – Weekly consumer sentiment
• Wednesday November 9 – Consumer confidence (November)
• Thursday November 10 – Housing finance (September)
• Thursday November 10 – Tourist arrivals & departures (September)
• Friday November 11 – Speech by Reserve Bank official

Overseas

• Monday November 7 – US Consumer credit (September)
• Tuesday November 8 – US Election
• Tuesday November 8 – US NFIB business optimism (October)
• Tuesday November 8 – US JOLTS survey (September)
• Tuesday November 8 – China trade data (October)
• Wednesday November 9 – China inflation data (October)
• Wednesday November 9 – US Wholesale sales October)
• Thursday November 10 – US Federal Budget (October)
• Friday November 11 – US Consumer sentiment (November)

Food for thought

–  Strive not to be a success, but rather to be of value.

Albert Einstein

Last week’s TV roundup

• Simon Bond of Morgans shares some outside-the-square stock picks. Don’t miss it.
• For a hedge fund manager’s view of the stock market, the economy and more, Marcel von Pfyffer from Arminius Capital joins Super TV.
• To talk about the US election and what the outcome could mean for stocks, Shane Oliver of AMP Capital joins the show.
• In a low interest rate environment, the SuperConcepts SMSF Investment Patterns survey has shown hybrids and other income-paying assets have become sought after investment alternatives. To discuss, Philip La Greca joins Super TV.

Stocks shorted

ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short, which could suggest investors are expecting the price to come down. The table also shows how this has changed compared to the week before.

This week one of the biggest movers was Aconex, with a 1.71 percentage point increase in the proportion of shares sold short, to 10.44%. Myer followed, moving 1.08 percentage points to 17.51%.

Source: ASIC

Charts of the week

Trump and Clinton neck and neck!

The race to the Whitehouse is deadlocked according to a recent IBD/TIPP poll – and the result of other polls just like it have sent stocks south this week. Can the FBI email investigation trump a Clinton win? (Data as at 3 November, 2016)

The race that literally stops the nation!

Commonwealth Bank, Business Insider

Credit and debit transactions data from the Commonwealth Bank shows that in the 6 minutes the Melbourne Cup was running, transactions fell by over one-third. It truly is the race that stops the nation!

Top five most clicked stories

• Paul Rickard: NAB’s 7% yield looks attractive
• Peter Switzer: Will the market be trumped down 10% thanks to the FBI?
• Tony Featherstone: US election jitters creates healthcare buying opportunity
• Charlie Aitken: Thumping the table on Star Group, Link and APN Outdoor
• Tony Featherstone: 7 steps to finding a great stock

Recent Switzer Super Reports

• 3 November: Presidential election
• 31 October: Will Trump trump the market?

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.