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A rocky October saw U.S. equities drop -2.66% going into the U.S. Presidential election. Negative sentiment from rising COVID-19 cases in Europe and the U.S., combined with the breakdown of Phase 4 stimulus talks and general election risk contributed to the decline. Economic data, however, was more upbeat. Q3 GDP printed at +33% (annualized rate on the quarter) and strong demand for single family homes and durable goods contributed significantly to the snapback. Service sector demand, however, continues to suffer from pandemic restrictions.
Turning to perhaps the most anticipated event of the year, the U.S. Presidential election continues to hang in the balance with vital swing states still within 1% margins in favor of Biden. President Trump has already gone on the offensive, initiating legal action in Pennsylvania and threatening it in other states. Just as important, but much less covered, is the outcome of the U.S. Senate election results. Last month we covered the likely market reaction to a drawn out contested election and this month we focus on the potential impact of a unified government on market returns.