CEO DailyCFO DailyBroadsheetData SheetTerm Sheet

Here’s what could happen to your portfolio in the case of a ‘no deal’ on fiscal stimulus

October 21, 2020, 9:18 AM UTC

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.

Good morning. The so-called deadline for a stimulus accord came and went yesterday with no deal, and yet Nancy Pelosi remains “optimistic.” That assessment, as thin as it was, was enough to give the markets a meager boost on Tuesday. That enthusiasm is fading fast. U.S. futures are down this morning.

Let’s see what’s moving the markets.

Markets update


  • The major Asia indexes are mostly higher in afternoon trading with Hong Kong’s Hang Seng the best of the bunch, up 0.75%.
  • Some 60,000 people in China have now taken an experimental COVID vaccine, and so far none have reported any adverse side effects. The country is allowing citizens to take the drug even though it’s still in the trial phase.
  • Impossible Foods yesterday began selling its plant-based meat in Hong Kong and Singapore, its first major markets outside of North America.


  • The European bourses were a touch higher out of the gates, before falling. The Europe Stoxx 600 was down 1.2% two hours into the trading session.
  • The ECB signaled it may be readying further monetary stimulus to keep the eurozone economy from sinking as COVID cases spike across the continent, presenting, in the words of Christine Lagarde, “a clear risk.”
  • What’s a social bond, and, more importantly, who’s selling them? They’re joint securities to help finance the EU’s various COVID-related jobs-aid programs, and investors are snatching them up at a record clip.


  • In choppy trade, U.S. futures point to a weak open as volatility once again dominates the markets. The Dow at one point was up more than 300 points yesterday before shedding much of that in afternoon trade. Such has been this rollercoaster stimulus trade.
  • Shares in Netflix are off more than 5% in pre-market trading after the streaming giant missed on subscribers, and offered a tepid outlook.
  • Google shares closed 1.4% higher yesterday as investors shrugged off a landmark antitrust lawsuit against the search behemoth launched by the DOJ and 11 state attorneys general. Meanwhile, over on Bing yesterday the top search term was…”Google.”


  • Gold is up, trading in a tight range around $1,920/ounce.
  • The dollar is down.
  • Crude is down again, with Brent trading around $42.70/barrel.


The big “What if”

Most everyone in Washington would agree that some form of fiscal spending is urgently needed to help unemployed Americans and cash-strapped cities and municipalities. And yet here we are again stuck inside a Groundhog Day loop where deadlines come and go, and we slide back to the starting point where we’re presented with, yep, a brand new deadline. The next one is “by the weekend.”

Bull Sheet has gone on the record more than once calculating the odds of a deal before Election Day at no greater than zero. But there are plenty of investors who refuse to give up hope. And as long as there’s hope, we’ll continue to look at what it means for the economy and for the markets.

Most economists agree that, at the very least, a top-up on unemployment benefits is crucial. Without it, the recession risks soar. A reminder: more than 25 million Americans are living off unemployment benefits right now. Without it, American families are facing a historic fiscal cliff.

The markets’ fortunes too are tied to more stimulus. Dan Ives, managing director of equity research and analyst at Wedbush Securities, told Fortune‘s Anne Sraders two weeks ago that failure to reach a deal would shave 5% off the S&P 500; a deal, conversely, would add 5% to the benchmark index. That would imply the S&P topping roughly 3,600 (with a deal) or plunging to roughly 3,250 (no deal) using the Oct. 7 market close as a guide. It closed yesterday at 3,443.12.

Ives is not alone in charting that kind of range. Several equities analysts, including Goldman Sachs and Morgan Stanley, have told investors to calculate about a 10% swing—the difference between a correction and a sustained rally—between the best case (a stimulus deal, plus other favorable developments like vaccine progress) and the worst case (no deal).

So, there’s a lot on the line.

Meanwhile, the tedious nature of the talks may be already trying the patience of investors. “We believe the market is largely discounting a stimulus prior to the election, given the political difficulties of compromising within the next 2 weeks,” Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance ($4.5 billion AUM), said in an email exchange with me yesterday.

By the way, Zaccarelli sees even more of an upside for the S&P should a stimulus deal be reached. The S&P, he notes, is currently trading at about 22 times next year’s consensus earnings of $158. “We’re expecting a year-end target for the S&P of 3800 with a stimulus deal (e.g. 23 times $166) and we have a year-end target of 3550 without a stimulus deal (22.5 times $158),” he adds.

So, these are some of the numbers to keep in mind as talks bog down.

The ball is in your court, Nancy and Steven.


Have a nice day, everyone. I’ll see you here tomorrow. 

Bernhard Warner

As always, you can write to or reply to this email with suggestions and feedback.

Today's reads

Glass ceiling, shattered. Deal maker. Wealth management whiz. Turnaround specialist. The CV of Jane Fraser, Citigroup's incoming CEO, is as impressive as they come on Wall Street. Fortune's Claire Zillman, who wrote about the lack of women at the top of the banking world last year, profiles Fraser in the pages of this month's issue. You can read Zillman's fascinating piece here about how Fraser broke the highest of glass ceilings.

Consider the lobster war. Off the shores of Nova Scotia, tension is brewing over Canada's lucrative lobster trade, pitting indigenous lobster fishermen against commercial fishing operations. The question of who has the fight to fish the waters has triggered violence, vandalism and a deep scarring in the community, the New York Times reports.

Some of these stories require a subscription to access. There is a discount offer for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.

Market candy

Quiz time

Living overseas, I check the FX tables daily. So, here goes... Which currency has outperformed the dollar by the widest margin so far this year?

  • A) Swiss franc
  • B) Euro
  • C) Japanese Yen
  • D) Chinese Yuan

The answer is A, the Swiss franc, which is up 6.3% YTD on the greenback. All of the currencies I've listed here are outperforming the dollar. Which ones are underperforming the dollar? The British pound, Turkish lira and Brazilian real, to name a few.