Market snapshot: positive start despite backing for Biden

Democrats are typically perceived as pro-regulation, but Wall Street keeps moving higher.

Fresh hopes of fiscal stimulus in the US provided another boost to stocks in what has been a generally positive, if challenging, week.

The need for speed in the US economy was further highlighted in US employment data which suggested that the labour market recovery is running out of steam. Meanwhile, the President suggested that there may be specific help on the way for the airline sector, although some doubt remains as to whether such an isolated approach would be accepted or, indeed, effective.

Meanwhile, the polls are increasingly suggesting that Joe Biden is in the driving seat for the election. The assumption that he would look to raise taxes would be negative for corporate America in particular, thus putting pressure on financial markets, but offset by expectations that an immediate and comprehensive fiscal stimulus package would also follow.

The three main indices have continued to improve, with the Dow Jones currently standing down just 0.4% in the year to date, the S&P 500 up 6.7% and the tech-focused Nasdaq index ahead by 27.3%.

The US third-quarter reporting season starts in earnest next week, with the banks in the vanguard as is usually the case. The likes of JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) will deliver updates which could also provide an early read across for UK banks, themselves due to report towards the end of the month, especially with regard to further bad loan provisions and where applicable, investment bank trading business.

In the UK, there was proof, if it were needed, that the economy faces an arduous few months ahead. Despite the boost of the “Eat Out to Help Out” scheme in August, the economy grew by just 2.1%, versus expectations of 4.6% and compared to 8.7% in June and 6.6% in July.

The disappointing number will do little to assuage concerns that stimulus needs to be added rather than withdrawn, and is unlikely to change international perceptions of the UK market generally as an investment destination to avoid. While the FTSE 100 index has been less susceptible to some of the more volatile market moves of late, it nonetheless remains down 20% in the year to date, and is seemingly unable to participate in any improvements to global economic fortunes.