Election Trade

On Tuesday, the stock market took a backseat. Sure, the S&P 500 notched its best gains since mid-September, but eyes were elsewhere, waiting to find out. 🇺🇸

⚡ Closing Bell:

• Dow Jones: ⬆️ +1.0% to 42,221.9 – All sectors rallied, led by consumer discretionary.

• S&P 500: ⬆️ +1.2% to 5,782.8 – A broad rally lifted all 11 sectors.

• Nasdaq: ⬆️ +1.4% to 18,439.2 – Tech stocks led the charge.

All 11 S&P 500 Sectors closed in the green, led by Consumer Discretionary with a 1.83% gain. Markets appear ready to move beyond election uncertainties, though analysts caution that a prolonged vote count could introduce volatility.

A Fork in the Road:

The Feds did its best to stay above the political fray, but the stakes were high. Chairman Jerome Powell and the central bank maintained their distance from politics throughout the year, but the outcome of Tuesday’s vote has now redefined their path.

What’s at Play? The incoming president now has a significant role in shaping the Fed’s future by filling key open positions. With Powell’s term ending in May 2026, the new leader will soon decide who steps up as the next face of U.S. monetary policy.

🤔 Continuity or Change? The question is whether the new administration will pursue a steady approach or push for a shake-up. While some anticipate a more conventional path, history shows disruption isn’t off the table.

The Rate Debate: Markets had been anticipating a 25 basis point cut ✂️— potentially the second rate cut of the year — but the shadow of Election Day is likely to loom over the discussions at the table.

The choices made now will shape not only monetary policy but also the central bank’s long-term relationship with the White House.

More Gift Cards than Cash Reserves?

2024 has been rough for casual dining chains, with TGI Fridays being the latest casualty, filing for bankruptcy protection.

→ Sales dropped to $728 million in 2023, a 15% decrease, and store numbers fell by 11% since 2021.

→The chain’s 39 company-owned locations are dwarfed by 122 franchised U.S. outlets and 316 international ones, keeping most franchises out of bankruptcy — for now.

💳 Gift Card Pressure – TGI Fridays has $49.7 million in outstanding gift cards, outstripping its cash reserves even after a $5.9 million restructuring loan. Franchisees could face a wave of redemptions without guaranteed reimbursement, risking significant losses.

“Use It or Lose It” – Bankruptcy announcements often trigger a rush to use gift cards, potentially pushing franchise owners to cover costs with no assurance of central reimbursement. The judge has allowed TGI Fridays to keep its gift card program running temporarily as franchisees review their options.

💸 Revenue Troubles – TGI Fridays lost control of vital revenue streams after breaching the terms of $375 million in bonds issued in 2017. Control shifted to bondholders following a nonrecoverable $2 million vendor overpayment.

A Risky Scenario – If customers rush to redeem cards, franchisees could face a financial squeeze akin to a bank run, with TGI Fridays unable to support them. Talks of a sale are underway, but the situation remains precarious.

$100 Million on AI?

Two years after ChatGPT’s debut, customer service is emerging as an AI frontrunner. T-Mobile is investing $100 million in OpenAI’s IntentCX to revolutionize its customer support.

Next-Level Service: Unlike current rules-based systems, IntentCX will analyze billions of data points and connect directly with T-Mobile’s systems to proactively handle customer needs and execute tasks autonomously. IntentCX will offer on-the-spot solutions by analyzing live network data, enhancing customer interactions.

Beyond T-Mobile: This isn’t just an internal upgrade. T-Mobile plans to market its AI-driven customer service tech to other businesses, presenting a broad opportunity for industries looking to elevate customer engagement.

For OpenAI, this $100 million contract 💰 with T-Mobile is one of its largest enterprise deals yet. If IntentCX proves successful, other big players could follow suit, providing a boost to OpenAI’s revenue.

🧩 Sector Snapshots

Consumer Discretionary (S5COND): ⬆️ +1.83%
Retail and tech stocks saw strong gains, as investors anticipate consumer-driven growth in Q4.

Trump-Linked Stocks: Some companies that could benefit from a Trump presidency experienced notable gains:

• Geo Group (GEO): +6.7% – The for-profit prison operator jumped on Election Day expectations.

• Tesla (TSLA): +3.54% – Biggest gainer among the “Magnificent Seven” momentum stocks.

Other Movers:

• Palantir (PLTR): ⬆️ +23.47% – Top performer on the S&P 500 after strong Q3 earnings and upbeat guidance amid AI growth.

• GlobalFoundries (GFS): ⬆️ +14.88% – Solid Q3 results sent shares soaring.

• Celanese (CE): ⬇️ -26.32% – Worst on the S&P 500 after a big Q3 earnings miss.

• Trump Media & Technology Group (DJT): ⬇️ -1.2% – Shares were halted multiple times on volatility, ending down for the day.

Commodities Check: ✔️

• Crude Oil: ⬆️ +0.9% to $72.11/barrel – Driven by market optimism and a dip in the U.S. dollar.

• Gold: ⬆️ +0.2% to $2,752.50/oz – Investors seek a safe haven amid election uncertainty.

More:

• 2-Year Yield: ⬆️ +2.1 basis points to 4.2%

• 10-Year Yield: ⬇️ -1.8 basis points to 4.29%

• Bitcoin: ⬆️ +3% – The cryptocurrency rose as risk appetite returned to the market.

• ❗Dollar: The dollar surged to its highest rally since March 2020, driven by early results from the U.S. presidential election (9:59 PM CST).

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The Week Ahead:

• ❗Fed Watch: The Fed’s two-day meeting starts today. Markets are betting on a 25 bps rate cut by Thursday.

#TRUTH:

“I have opinions of my own, strong opinions, but I don’t always agree with them.” 😊
— George W. Bush, 43rd President of the United States

The stinger

Disclaimer

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