BANK STOCKS SOAR! - JOE BIDEN PROMISES OBAMA'S CRONY CRIMINAL BANKSTERS BOTTOMLESS BAILOUTS AND NO JAIL TIME

 

Dow Soars on Election Day, Banking Stocks Lead the Way

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JOHN CARNEY

3 Nov 202020

3:01

The U.S. stock market roared into election day, sending the Dow Jones Industrial Average over 450 points higher.

The Dow climbed by more than 680 points, or around 2.5 percent Tuesday morning, before retreating from their highs.

With two hours of trading left, the Dow is up 460 points, or 1.74 percent. The Nasdaq Composite is up  1.5 percent. The S&P 500 is also up 1.5 percent. The small-cap Russell 2000 is up 2 percent.

Ten of the 11 sectors of the S&P 500 were up. The Energy sector was down 1.2 percent. The Financials sector was the best performing, up 2.3 percent for the day, lead higher by the bank component’s 2.7 percent gain and the consumer finance subsector’s 2.8 percent gain. The KBW Nasdaq Bank Index, which tracks the stocks of the biggest banks, rose 2.5 percent.

Donald Trump’s victory for 2016 set off an explosive rally in stocks, defying widespread predictions that he would lose or that if he won it would cause the market to crash.

Many of the big Wall Street firms have Joe Biden as the runaway favorite to win the presidency, just as they had Hillary Clinton the favorite four years ago. Morgan Stanley said in a note to clients Tuesday that they estimate a 76 percent chance that Biden wins and the Democrats take control of the Senate. They estimate just an eight percent chance that Trump wins and GOP holds the Senate. The Wall Street firm gives just a thirteen percent chance of a mixed result with Biden winning but the GOP holding the Senate.

Biden has raised tens of millions of dollars from Wall Street. During his time as a U.S. Senator from Delaware, Biden earned the nickname “Plastic Joe” for his willingness to promote legislation friendly to credit card issuers, including a law that made it harder for bankrupt customers to get debt relief.

Most analysts think the economy and the stock market could get a big boost if Democrats sweep the election. A unified government would be more likely to quickly pass a stimulus bill, likely giving stocks a short-term boost and ameliorating the drag from new restrictions aimed at stemming the pandemic’s surge.

Biden’s immigration and visa programs would likely import enough workers to ease wage pressure, boosting corporate profits by lowering compensation costs. An increase in foreign workers also generates new customers for U.S. companies, especially U.S. banks and large retailers. Biden is viewed as likely to lift tariffs on China, allowing U.S. companies to send more jobs to cheaper overseas labor markets.

Biden has promised a rush of higher taxes and new regulations, including climate change schemes that would make energy more costly and damage U.S. manufacturing.

Fear and uncertainty dominate Jackson Hole central bankers’ meeting

The annual Jackson Hole conclave of central bankers, which concluded over the weekend, underscored the incapacity of global financial authorities to devise any policies either to bring about economic growth or counter the mounting contradictions in the financial system.

Reporting on the meeting, held in virtual format this year because of the COVID-19 pandemic, the Financial Times noted: “It was the head of Singapore’s monetary authority who best summed up the biggest fear gripping the virtual Jackson Hole conference this year.

“‘We’re not going back to the same world,’ Tharman Shanmugaratnam warned.’”

The central initiative at the gathering was the decision by the Fed’s key policy-making body to maintain interest rates at their ultra-low levels for an indefinite period and keep pumping money into the financial system.

The decision, announced by the Federal Open Market Committee as the conclave opened and elaborated on in a keynote speech by Fed Chair Jerome Powell, was in effect a guarantee to Wall Street that its demand for “forward guidance”—lower interest rates for longer—would be met.

The Fed said it would no longer be guided by a 2 percent inflation rate limit in determining its interest policy, but would instead focus on an “average” rate of 2 percent, meaning that the cheap money regime could continue even if prices rose above that level.

As for dealing with the slump in the global economy—the most serious since the Great Depression—and combating the potential for further storms in the financial system following the market meltdown in mid-March, there were no answers, as underscored by the remarks of the Singapore finance minister.

“We’ve got to avoid a prolonged period of high levels of unemployment, and it’s a very real prospect,” he said. “It is not at all assured that we will get a return of tight labour markets even with traditional macroeconomic policy being properly applied.”

It was a significant comment because one of main themes in remarks by central bank chiefs was that monetary policy alone would not be sufficient to restore growth, and government intervention was needed to boost the economy. But, as Shanmugaratnam noted, even if “properly applied,” there were no guarantees of success.

According to the Financial Times, the notion that central bankers “need to face the reality of permanent upheaval and long-term economic damage” was the “main theme” of the event.

One of the most frequently cited academic papers produced for the meeting was prepared earlier this month by Colombia University academic Laura Veldkamp on the long-term effects of the COVID-19 pandemic.

The paper said that the biggest economic effects of the pandemic “could arise from changes in behaviour long after the immediate health crisis is resolved.” A potential source of such a long-lived change was a shift in the “perceived probability of an extreme, negative shock in the future,” and that “long-run cost for the US economy from this channel is many times higher than the estimates of the short-run losses in output.”

The paper continued: “This suggests that, even if a vaccine cures everyone in a year, the COVID-19 crisis will leave its mark on the US economy for many years to come.”

In other words, the pandemic was not only a trigger event, acting on the contradictions that had built up in the economy and financial system, but a transformative one as well.

With the Fed now having formally committed itself to the endless supply of cheap money to Wall Street, attention will turn to the European Central Bank (ECB), which is also conducting a strategic policy review, to see whether it goes down the same road.

While the governing council, under the presidency of Christine Lagarde, may be inclined to move in the same direction as the Fed, it would face certain opposition from Germany’s Bundesbank, which has expressed opposition to the easing of monetary policy.

A member of the governing council told the Financial Times, “we will look at it,” but the Bundesbank would be “very nervous” about it.

“We are not out of firepower by any means, and to be honest, it looks from today’s vantage point that we were too cautious about our remaining firepower pre-COVID,” he said, adding that there are times when we “need to go big and go fast.”

The actions of the Fed have done nothing to boost the real economy, as an increasing number of companies announce that temporary layoffs will be made permanent.

The Wall Street Journal reported Saturday that a survey conducted by Randstad RiseSmart found that “nearly half of US employers that had furloughed or laid off staff because of COVID-19 are considering additional workplace cuts in the next 12 months.”

This indicates that the pandemic has been a trigger for a major restructuring of employment conditions.

The effects of the Fed’s policies and the further monetary easing to come are focused on the stock market, with Wall Street indexes rising to the record levels they achieved in February. The main beneficiaries have been the high tech companies—Apple, Microsoft, Alphabet (the owner of Google) and Facebook—which together comprise more than a fifth of the Nasdaq index.

The extent of their rise and growing financial and monopoly power is indicated by the results of an analysis carried out by Bank of America Global Research, reported by the business channel CNBC. It found that the market capitalization of the major US tech firms, now standing at $9.1 trillion, was greater than the market capitalization of the entire European market, including the UK and Switzerland, at $8.9 trillion. In an indication of the massive shift that has taken place, the research note pointed out that in 2007, total European market capitalization was four times that of US technology stocks.