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Dow Soars 480 Points as Wall Street Gambles Blindly on the Election

Last Updated November 3, 2020 7:39 PM
Francois Aure
Last Updated November 3, 2020 7:39 PM
  • The Dow Jones rallied 1.8% Tuesday.
  • Wall Street recklessly pushed the U.S. stock market higher as it bets on a big victory for Joe Biden.
  • Dow bulls are bidding up the market as most traders wait for certainty.

The Dow Jones surged 480 points in thin liquidity on election Tuesday, as Wall Street pummeled the U.S. Dollar and risky bets were placed on the outcome of Joe Biden’s showdown with President Trump.

Dow Jones Rallies on Big Biden Bets

All three major U.S. stock market indices rallied on Wednesday, as the S&P 500, Nasdaq, and Dow Jones were around 2% higher on the day.

Dow Jones, Stock Market
The Dow Jones rallied 480 points on Tuesday. | Source: Yahoo Finance 

In economic data, a positive reading in factory orders was insignificant in the face of the U.S. presidential election.

With turnout spiking around the U.S., Wall Street bulls appear confident that they will know the election result tonight and that it will likely be a Biden victory.

Watch the video below for Jim Cramer’s take on the state of markets.

Hopes of imminent fiscal stimulus post-election is arguably the biggest carrot for investors. Once the election is resolved, either candidate is likely to get funds out directly to the people. A Biden presidency is also Dow positive in theory because he is more aligned with free trade.

Money Supply, Federal Reserve
The U.S. money stock has exploded in 2020 as the Federal Reserve continues to print money. | Source: tradingeconomics.com 

Nancy Pelosi has been explicit in her praise of how well the last package worked, and should there be a blue wave, another trillion-dollar bazooka seems likely . The longer-term ramifications of a blue wave may be less positive, as higher taxes on the very wealthy and more spending is on the horizon.

Is It 2016 All Over Again For Pollsters?

What if the polls are wrong? Here is Ludwik Chodzko-Zajko’s take on the matter. The Trading Dealer for IG Group told CCN.com:

They’d have to be very wrong – in a way that ruins credibility of the major pollsters. A high turnout (now inevitable) will skew this to an extent. For Trump to win either the polling is very inaccurate (more so than 2016), or turnout surges heavily in his favor. The “shy tory” phenomenon of 2015 fame has reappeared in the vocabulary of American pundits. There is little hard evidence of this in the states (plenty of anecdotal evidence). This & turnout will still likely be the talking points overnight.

The 10-Year U.S. Treasury yield  appears to be pricing in the inflationary impact of another round of fiscal aid, but a buoyant stock market looks completely disinterested in the threat of higher rates.

Watch the video below for JPMorgan’s concerns about a stock market selloff.

Liquidity is a big part of the Dow’s surge. With most traders on the sidelines, thin trading volumes allow big players to bully the market.

Dow 30 Stocks: Riding the Wave

It was an extremely positive day in the Dow 30 , as only Chevron (-1%) was meaningfully in the red. Goldman Sachs looked to be the big winner amid a 4% rally. JPMorgan Chase also rallied, up over 3%.

Boeing stock rallied 3.2%. The aerospace contractor would be a huge benefactor of another stimulus package to keep its partner airlines afloat.

In big tech, Apple stock gained 1.6% on the day.