Normally the first trading day of a month is decisively positive. However, with Election Day on Tuesday (today), we should expect flattish action until the outcome of the election is made clear. Normally I would say that would be about 10PM EDT, after which the index futures market tends to get very active. That however might not occur as two of the Senate races may go to a second round of voting. More on that as I handicap the election.
As it now stands, the Senate is comprised of 53 Democrats, 45 Republicans and 2 Independents. However, the Independents, Angus King of Maine and Bernard Sanders of Vermont (a Socialist) caucus and by extension vote with the Democrats. I can’t remember the last Independent who did not caucus with the Democrats. Per Real Clear Politics, an unbiased political website, according to their methods, the Battle for the Senate is looking to have with a high degree of certainty 47 Republicans and 45 Democrats who are elected or in office with 8 Senate spots up for grabs. Those battleground elections will determine how the futures trade tonight and the market trades on Wednesday. Here is how I think those races will play out (along with running totals):
- Alaska (AK) – the victory will go to the Republican, Sullivan – 48R, 45D
- Colorado (CO) – the Republican Gardener will win – 49R, 45D
- Georgia (GA) – this one has three candidates, none of which will garner at least 50%, forcing a run-off election in January. If, the Republicans already have 51 seats, the democrats will sit home and not vote. I expect that to be the case and the Republican Perdue will be victorious, but again not until 2015. Call it one contingent Republican – 49R, 45D +1R contingent.
- Iowa (IA) – Joni Ernst ( R) will win and become the Elizabeth Warren of the GOP – 50R, 45D +1R contingent
- Kansas (KS) – another independent, Orman will get elected and as is usually the case caucus with the Democrats – 50R, 46D +1R contingent
- Louisiana (LA) – another three candidate race which will go to overtime in December. Too close to call but again the Democrats might stay home in December if the Republicans already grabbed a majority. On the other hand, if Mary Landrieu can summon her inner Huey Long she might successfully defend her seat. Still too close to call and I will leave it as a toss-up – 50R, 46D +1R contingent + 1 toss up
- New Hampshire – a black and blue campaign in which Shaheen (D) will win in a tight race that could force a recount – 50R, 47D +1R contingent + 1 toss up
- North Carolina (NC) – The Liberal 3rd party candidate will spoil Democrat’s Kay Hagen’s bid for election, giving the victory to Republican Thom Tillis – 51R, 47D +1R contingent + 1 toss up
Here’s a wildcard – West Virginia Senator Joe Manchin, who is not up for reelection, switches part affiliation from Democratic to Republican.
So, while a Republican majority is likely, it may not materialize until January. If it takes that long, the S&P 500 (SPX) could get whacked tonight. If the GOP wraps it up tonight, buyers will materialize in the futures market and regular session on Wednesday. Either way, today we should expect another inside lackluster trading day.
We can all discuss the election in great detail in this week’s chat on Wednesday, However, I am going to have to push that off till 3PM to 4PM just for this week.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC had no positions in stocks mentioned — although positions can change at any time.
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