Today's big stories

US stock market investors seem to be expecting Democrats to win this year’s presidential election, says Goldman Sachs
The world's oldest and most popular hedge fund strategy may have just fallen apart – Read Now
German software giant SAP reported a positive preliminary quarterly update

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Spin Doctors

What’s Going On Here?

A recent report from investment bank Goldman Sachs showed what investors think will happen when November’s US election rolls around. Jackpot.

What Does This Mean?

Specialist prediction markets currently show the Democratic Party will win majorities in the House of Representatives, the Senate, and the White House, but Goldman Sachs’ analysts used two more indicators. First, the options market: the bets investors are making on future prices suggest, on average, that the Senate majority and president mightn’t actually be confirmed by the end of Election Day. That’s because there’s high implied volatility after the election date, which hints that investors are expecting continued uncertainty. Then Goldman looked at US stocks, whose recent ongoing rise seems to show investors are comfortable with the Democratic majority outcome reflected in polls and prediction markets.

Why Should I Care?

For markets: Electile dysfunction.
Higher-than-usual levels of investor uncertainty going into the end of the year – particularly concerning the US election – are partly down to coronavirus. Last election, 60% of the electorate voted on Election Day, while the rest voted early or by mail. But the proportion of voters using alternative methods will probably be even higher this time because of social distancing guidelines. In a tight vote with more sources to account for, it’ll be harder for investors to know whether they’re coming or going.

Zooming in: Wrong side of the tax.
Some companies’ earnings are more sensitive than others to the tax increases a Democratic government might bring. But Goldman’s analysts noted that those firms’ stock prices still haven’t fallen enough to reflect the increased chances Democrats will win. Still, there’s at least one industry that seems well aware of the looming threat to its bottom line: healthcare companies – whose profits might feel the effects of the party’s healthcare policies – have seen their stocks underperform in line with the rising likelihood of a Democratic majority.

Be prepared: Why the election might not affect markets like you’d expect.

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Rest In Uncertainty

What’s Going On Here?

After two high-profile investment managers shut their long-short equity funds, investors are wondering if this is the end for the world’s oldest and most popular hedge fund strategy.

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Bit By Bit

What’s Going On Here?

Europe’s largest tech company, SAP, announced a better-than-expected second-quarter update, and said it’s – very gradually – getting back to business as usual.

What Does This Mean?

SAP’s update was a preliminary one, so the final numbers at the end of this month might change a little. But generally speaking, the company was pretty surefooted: its revenue last quarter was 2% higher than the same time last year, and its profit was up 7%. That suggests a faster recovery from the coronavirus slump than either SAP or its investors were expecting.

SAP had previously lowered its 2020 earnings growth forecast after seeing its customers hit pause on tech spending earlier in the year. But now that a recovery seems to be on the cards, the software giant’s confirmed the earnings growth it promised at the end of its first quarter is achievable after all.

Why Should I Care?

For markets: Going by the book.
SAP’s stock rose 7% on Thursday after the company’s update, which might reflect the relief some investors are feeling that European tech firms – still firmly in their US rivals’ shadows – have seen their fortunes improve. A better-than-expected quarter, meanwhile, should result in a higher forecast for the rest of the year, all else equal. But seeing as SAP left its forecast unchanged, investors might’ve interpreted it as a textbook example of underpromising in hopes of overdelivering later on – which typically results in a stock price boost.

The bigger picture: All wiggled out.
America’s biggest tech companies have continued their ascent this week, with the likes of Apple, Amazon, and Microsoft driving the country’s tech-heavy stock market index to record highs. But that rise might not be sustainable (tweet this). Deutsche Bank has warned that the speed and size of the gains don’t leave much wiggle room for another uptick when earnings reports are released later this month. JPMorgan, for its part, seems less worried: the bank reckons stocks are still attractive compared to bonds.

Take action: How to invest in big tech ahead of earnings season.

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💬 Quote of the day

“Everything becomes a little different as soon as it is spoken out loud.”

– Hermann Hesse (a German-born Swiss poet, novelist, and painter)

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☀️ Broaden your horizons

You might not know much about the Nigerian economy, but the country’s going through some fascinating changes in response to the pandemic. So here’s your chance to learn more about what’s going on: our next Nigerian event is open to everyone.

🇳🇬 Nigeria: COVID-19 & The Nigerian Economy – 5pm West Africa Time, July 11th
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📚 What we're reading

Cancel culture isn’t out of hand (Vox)
Three Guiness World Records, one day (YouTube)
Bleep bloop bloorp (Science Alert)

Finimize - 🧐 Goldman predicts the US election

Today's big stories

Spin Doctors

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Rest In Uncertainty

📕 Get the story behind the numbers

Bit By Bit

What’s Going On Here?

What Does This Mean?

Why Should I Care?

☀️ Broaden your horizons

Older messages

⏰ Jack Bauer’s 4 billion deal

🤫 Palantir's secrets revealed

🤨 Buffett bets on fossil fuels

👑 Hail Tesla, king of carmakers

😜 US stocks become US stonks

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