Today is the midterm election, so we hope everyone who is eligible to vote will cast their vote. When those votes are counted and the results are known, the uncertainty surrounding the midterm election will be removed. That is good from the standpoint that the market doesn't like uncertainty.
The latter point notwithstanding, sometimes the certainty of something isn't always interpreted as a good thing.
This day, then, will prove to be a great, big guessing game with respect to the results and the stock market's response to those results. Accordingly, don't be surprised if today's action has a seesaw feel to it.
At the moment, the futures for the S&P 500, Nasdaq 100, and Dow Jones Industrial Average are all pointing to a modestly lower start.
We'll be careful not to read too much into the indication. It probably just reflects some angst in the idea that the outcome of the election could figuratively be a consequential "swing vote" for the market's direction in the very near term.
There isn't a great deal of conviction right now, however, because there is literally nothing concrete to hang one's trading hat on when it comes to the midterm election. That will come tomorrow.
The polls might be suggesting one thing or another, yet the experience of the Brexit vote and the 2016 presidential election has diluted the value of polling data for many participants.
So, take any move today with a grain of salt and recognize that it will be subject to change -- perhaps material change -- by this time tomorrow.
At the same time, though, don't lose sight of the fact that the election outcome isn't the be all-end all for the market. The direction of interest rates, trade discussions, and economic growth matter far more and this midterm election isn't going to instill newfound certainty on any of those fronts.
What is certain at this juncture is that the third quarter earnings reporting period has been great (again) and that the market has its reservations about the great earnings news continuing in coming quarters.
That perspective rings loud and clear in the multiple compression that has been seen in the face of a litany of earnings reports that have S&P 500 earnings on track to increase close to 25% in the third quarter, according to FactSet.
Companies like CVS Health (CVS) and Eli Lilly (LLY) are among the latest luminaries helping to drive the impressive third quarter earnings results. Both companies exceeded consensus earnings estimates and delivered double-digit EPS growth.
CVS and LLY are indicated higher in pre-market action, yet the futures market shows that these particular companies -- and the many others that reported earnings since yesterday's close -- aren't whetting bullish appetites at this juncture.
Strikingly, neither is a report that China's Vice President Wang said China is ready to discuss a trade solution with the U.S. That seemingly positive overture was diminished somewhat by remarks yesterday from President Xi who made it sound like there won't necessarily be a quick resolution to trade matters even if both sides come to the table to talk trade.
The market's perception of trade matters could change (as it often has), yet it seems locked in right now on the midterm election and the uncertainty of what that election will produce for Wednesday's trading action.