The Bankers Are Fine

US equities managed to recover from fairly steep early losses to close mixed Thursday, as investors suffered through another session defined by what still seem like futile stimulus negotiations between The White House and Democrats.

Although it’s abundantly clear that Donald Trump wants a deal prior to the election, Nancy Pelosi isn’t inclined to give it to him. But even if she was, it wouldn’t matter. Mitch McConnell delivered some of his most unequivocal remarks to date on the subject after voting in Kentucky.

“He’s talking about a much larger amount than I can sell to my members,” McConnell said, of Trump’s proposal.

Read more: Mitch’s Message

Not to put too fine a point on it or otherwise beat a dead horse, but if McConnell and Senate Republicans thought a larger stimulus package had the potential to swing the election in favor of Trump, they’d probably try to get it done — or at least express some openness to a price tag larger than the $500 billion McConnell is set to put on the floor. That they haven’t speaks volumes, even if the president isn’t listening.

Anyway, tech underperformed Thursday, which isn’t surprising. There are some background flow dynamics likely affecting the price action into expiry, and Republicans are reviving calls to strip social media companies of their Section 230 shield after platforms stepped in to stymie a farcical attempt to breathe new life into the Hunter Biden-Ukraine canard.

Banks managed to rebound after a two-day slide. Morgan Stanley posted a solid quarter Thursday, and it’s worth noting that robust capital markets performance amid the pandemic has Wall Street on track to log its first $100 billion year for trading revenues in at least a decade.

The dot for 2020 ($84 billion) is for the first three quarters alone. That, while Main Street starves (literally, in some cases).

Of course, at this point, one can fairly blame Congress for the plight of everyday Americans as opposed to simply pointing the finger at bankers and chiding them for doing their jobs. After all, the pandemic wasn’t a Wall Street conspiracy, and the public elected politicians to act on their behalf. Right now, those politicians are failing.

Pelosi on Thursday afternoon told Democrats that stimulus won’t wait until January. One way or another, something is going to get done, it’s just not clear how.

Note that the dollar is having a good week. After consecutive declines, this week’s gain is poised to be the second best in months.

That’s almost never great for risk assets, and this week is proving no exception. Although the S&P will head into Friday marginally higher for the week thanks to Monday’s gain, three straight days of losses are a testament to jitters, disinterest, or maybe some of both.

Oh, and those wondering if investor appetite for corporate credit may have waned, the answer appears to be no. The latest Lipper data, out Thursday afternoon as usual, shows investment grade funds took in another $6.43 billion in the week to Wednesday.

High yield funds, meanwhile, raked in $2.2 billion.

Playing out in the background is a “big league” (to use a Trumpism) second COVID wave, both stateside and across the pond, where new lockdown measures rattled sentiment Thursday.

“High profile political COVID tests and lockdown pushback represent the latest in a series of touchstones suggesting the pandemic will not recede into the background as the real economy struggles to recover,” BMO’s US rates team said. “The fall and winter were long assumed to pose the greatest risk for a resurgence of the coronavirus and for the time being, the path of the pandemic appears to be conforming to these expectations.”


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