Stimulus Waiting Game

 Those politicians really enjoy dragging things out to the very last minute.  There is a lot of skepticism about a possible coronavirus stimulus deal happening before the election but now with Trump catching the virus, it may just speed up the process.  After all, it's Trump's decision.  He is trailing Biden badly in the polls, with only a month left, and all but the most die hard Republicans with their heads in the sand know that Trump is in a bad position.  

Trump has nothing to lose at this point, he might as well cave in to Pelosi and give her everything that she wants, because after all, most swing voters want more money, and he needs to throw everything against the wall and hope something sticks.  Because going with the status quo will basically assure a Biden victory.  

Just looking at the data, and compared to where the past Presidential polls were at in the month prior to the election, Biden has a very big lead over Trump, more importantly, has significant leads in most of the swing states that will decide the election.  

 

The numbers are looking really bad for most of these swing states, only Florida is within the margin of error, but even there, Biden has a 2.3% lead.  And Biden could lose Florida and Arizona and still win if he holds his lead in Pennsylvania, Michigan, and Wisconsin.  The other swing states are between 4-7% in favor of Biden.  And unlike previous elections, there seems to be very few undecided voters.  This is a Trump vs anti-Trump election.  Not many people are excited to vote for Biden.  But there are a lot of people that are excited to vote against Trump.  Biden could be a talking dummy and he'd still be ahead.  Most voters have made up their minds on Trump.  They either want 4 more years of Trump or they don't.  The next 30 days of campaigning or debates aren't going to move the needle.  

It is very surprising that most betting markets still show Biden as just a 3 to 2 favorite over Trump.  Given the polling data, Biden should be a bigger betting favorite.  There are still a lot of people with recency bias who view the Trump upset win over Hillary in 2016 and think that history will repeat itself and that there are a lot of shy Trump voters.  Unlike 2016, in which Clinton had a small lead and Trump was still somewhat of a unknown political entity, this time, Biden has a big lead and Trump is very well known.  The lack of undecided voters this time around makes the polls more accurate than they were in 2016, when there were quite a few who were sick and tired of establishment politics and decided to go with the wild card in Trump.  2020 is a totally different story.  

I have been waiting on the sidelines, expecting a fiscal stimulus deal headline coming out, for a chance to sell at premium prices, preferably around SPX 3420.  But those politicians are dragging things out.  I still expect a stimulus deal ahead of the election, which is why I haven't gone in to short.  Too much headline risk for me to take a position here.  I do expect any pop on a stimulus deal to be short-lived, it may only last a few hours.  

There has been a lot of short covering this week, as shown by the chart below.  This is because of the possibility of a stimulus deal.  Once that is out of the way, the shorts will come back to sell with both hands, and the longs will be reluctant to buy ahead of the election.  Expect another revisit to at least SPX 3220, and if things really get rolling, down to 3130.