Breakfast on Wall Street: the great debate

The great debate

It’s show time! Joe Biden and Donald Trump will face off tonight in an American television tradition that dates back to the 1960s. The presidential debate, hosted by CNN, a division of Warner Bros. Discovery (WBD), will begin at 9 p.m. ET and run for 90 minutes, including two commercial breaks. CNN’s Jake Tapper and Dana Bash will serve as moderators, while new rules will be put in place, such as muted microphones except when it’s a candidate’s turn to speak and no studio audience.

Big deal: More than half of the American adult population will watch the showdown, with “57% of the public saying they are extremely or very likely to tune in to at least some of the debate or the commentary that follows,” according to a new poll from the AP and the NORC Center for Public Affairs Research. More than a third are also very likely to tune in or watch the first of two scheduled debates live, demonstrating how important the platform is to gaining an edge in this high-stakes race.

The topics covered are numerous, from immigration to foreign policy including preparation for a second term. But for investors, the economy will be at the heart of the debates. This includes topics like the job market, taxes, the federal deficit, inflation and the cost of living in general, which have many Americans watching their bank accounts and wallets. This also includes investments related to sectors such as environmental rules surrounding the oil and gas industry, or regulations that concern the healthcare market or real estate.

“Voters fondly remember the Trump-era economy before the COVID-19 pandemic and are frustrated that price levels and interest rates remain high, even as the inflation rate went down. To the extent that the debate is about the economy during their respective first terms, Trump wins,” wrote Evercore ISI analysts Sarah Bianchi and Matthew Aks. “Biden’s job is to avoid spending too much time focusing on the macroeconomic defense of the economy and its balance sheet. It must pivot the debate towards the two competing visions of the future. Voters tend to support his ideas that “corporations and the wealthy should pay their fair share of taxes.” To the extent that Biden can also present and characterize all of Trump’s ideas – from tariffs to tax cuts – as inflationary, he might be able to make progress. »

In summary : “When voters are this divided and polls are this tight, even small movements can have big results.” In terms of stocks, the S&P 500 Index (SP500) increased by 58% since Trump’s election in 2016 through November 2020, compared to the 64% observed after Biden’s election (four months before the election). Looking at returns since they took office, the S&P 500 (SPY) (IVV) (VOO) climbed 67% with Trump in the White House, compared to 44% under Biden (to date).

Stay alive

Big banks are well positioned to withstand a severe recession, with all 31 banks subject to the Federal Reserve’s stress test this year remaining above their minimum capital requirements during this hypothetical situation. “While the severity of this year’s stress test is similar to last year’s, the test resulted in higher losses because bank balance sheets are somewhat riskier and expenses are higher,” said Michael Barr, the Fed’s vice chairman for supervision. In the hypothetical scenario, banks would have lost nearly $685 billion. The scenario assumed a 40% decline in commercial real estate prices, a 36% decline in home prices and a 10% unemployment rate. (24 comments)

More appetizing

Chipotle Mexican Grill (CMG) rose Wednesday in its first trading session after a 50-for-1 stock split, one of the largest in Wall Street history. Shareholders received 49 additional shares for each share held in the stock split, while a one-time stock grant was offered to CEOs and longtime employees. “We believe the stock split will make our stock more accessible to our employees as well as a broader range of investors,” Chipotle CFO Jack Hartung said when the decision was first announced. Interestingly, the restaurant chain has never done a stock split since going public in 2006. (3 comments)

The final frontier

Elon Musk’s SpaceX (SPACE) has been awarded an $843 million contract to develop a spacecraft that will deorbit the aging International Space Station after the lab shuts down in 2030. NASA will take ownership after the spacecraft is built, and it is expected to destructively disintegrate over time with the ISS by burning up in Earth’s atmosphere. The United States, Japan, Canada and participating European countries will operate the station through the end of the decade, while Russia will remain in the program through 2028. Elsewhere, SpaceX has reportedly raised the price of its public offering in the face of strong investor demand, valuing the company at a record $210 billion. (18 comments)