Anybody watching the U.S. election has been treated to an exceptionally tense race, with each camp still convinced of victory by lunchtime Wednesday. All eyes are on the electoral votes as the markets edge uncertainly into the middle of the week. With 270 votes being this election’s magic number, the battle for the middle ground was intense overnight. And the uncertainty could continue.
Keep a close watch on the electoral votes
Let’s take a quick look at two bellwethers in key asset types of cannabis and banking. Canopy Growth and TD Bank suit our needs for this purpose. The cannabis market leader was down by 9% at one point, erasing gains made on a presumptive Democrat victory. Meanwhile, TD Bank has gained a tentative 0.25%, with a five-day gain of 3.93%. These midweek, post-election movements are very specific, and both predict a Republican win.
Investors should therefore keep an eagle’s eye on those electoral votes. President Trump is so far sitting on 213, with Joe Biden boasting a 238 lead. While that looks like the Democrats are on a path to victory, several key states, such as Michigan, Wisconsin, and Philadelphia, could still come out batting for the incumbent party.
So, what should investors do about the “battleground stocks” of the TSX? Investors bullish on a “blue tsunami” have a window of opportunity to pick up some cheap shares in cannabis stocks such as Canopy Growth today. Shareholders in big corporate names and major banking institutions — such as TD Bank. Meanwhile, have a chance to trim the fat from a portfolio.
Expect stock market volatility to continue
The U.S election was roiling stocks long in advance of Tuesday’s historic vote. Uncertainty marked a tight race, the outcome of which the markets were at a loss to predict. And as the ballots are counted and the electoral votes mount up, speculation of all kinds is characterizing an election market of a type never before seen.
Nothing has been safe from the recent selloffs in equities. From corrections in overvalued tech and gold markets to uncertainty in the energy space, no asset type has gone unscathed. If investors are concerned about post-election volatility, there are few stock types that assure all-weather versatility.
Barrick Gold emerged as a key indicator stock this year after Warren Buffett’s much-trumpeted investment in the world-class miner. This name had ratcheted up 6.6% in the run up to the U.S. election.
Barrick is starting to sell off a little after the actual vote, however. This signals a leaching of uncertainty out of the markets. Or, at least it would do in any normal year. However, gold momentum has mirrored riskier assets this year, galloping alongside tech stocks and certain contrarian picks. Investors might reasonably expect to see a further selloff in gold if the status quo is disrupted.
Speaking of tech stocks, Shopify has leapt 4.7% post-vote. As investors watch those electoral votes, this pandemic-sensitive name is a key indicator of investor sentiment. As such, this upward momentum could be its last hurrah before a long-wished-for vaccine breakthrough.
