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Wall Street starts to move on to President Biden — Wall Street is still deeply lost on stimulus hopes (more below). But investors are starting to settle into the idea that Democratic nominee Joe Biden is likely to defeat President Donald Trump on Nov. 3. We are not saying this is correct. But polls like the one out Wednesday showing Biden up significantly in Georgia are beginning to erode the fear among investors that the election results will be a confusing mess that might not be resolved for weeks.
Standard Chartered’s Steven Englander: “Implied risk for a seriously contested US election looks to be at recent lows … This suggests to us that markets are increasingly confident that election results will be clear on or very soon after November 3.
“The wide Biden lead in polls and online markets points to Trump needing to overturn multiple state results for serious uncertainty to emerge, a much less likely outcome than if the results are extremely close”
Ryan Detrick, Chief Market Strategist at LPL Financial: “[T]he Biden portfolio has been outperforming the Trump portfolio, though we acknowledge these stocks are driven by other factors as well.
“The Biden portfolio has been supported, in part, by green energy stocks, which have been on a particular tear in recent weeks. Given Joe Biden’s proposal for green energy policies, these stocks have helped drive strong performance for the Biden portfolio recently.”
More stimulus follies — Wall Street dipped yet again when Treasury Secretary Steven Mnuchin said at the Milken Institute Global Conference that it would be “difficult” to get a stimulus deal done before the election. Duh. How many times do we have to do this?
And MM’s mailbox lit up with responses to Wednesday’s item suggesting Wall Street could be right because a big stimulus deal will come either later this year or early next. Mostly the response was: Yeah, right.
Brendan Buck, who served as a top adviser to former House Speaker John Boehner: “Tell Nick Conant I’ll bet him a dollar there’s no $2.5T stim in Q1. LoL.”
Greg Billings emails: “It’s pretty clear Republican Senators have written Trump off. Anything thing they do now would help a President Biden. Cynical? Not really. It’s the same game plan they followed in 2009, blocking anything Obama tried to do to get the country out of the ditch.”
Initial jobless claims at 8:30 a.m. expected to stay very high at 825K, down slightly from 840K … Trump and Biden hold dueling town hall events at 8:00 p.m. with Trump on NBC and Biden on ABC on the night that was supposed to feature the second presidential debate
ALSO TODAY: I’ll be moderating “Bots, Chatbots and Robots: The Future of Work” panel at the @politico AI Summit on Thursday, Oct. 15 featuring @KEBroady, Assistant Secretary John Pallasch of ETA, @USDOL, @karchopra, and @CongressmanRaja. #POLITICOAI. Full agenda for the AI event is here and livestream will be here.
And I’ll be moderating a Milken panel at 3:30 p.m. on “Finance as a Force Good.” In between I’ll be on CNBC previewing the dueling town hall events. Pray for me.
BIDEN KEEPS RAKING IT IN — Our Elena Schneider: “Joe Biden announced Wednesday evening that his campaign and affiliated committees raised $383 million in September, breaking a record he had just set the prior month as his campaign continues to ride a surge of online donations.”
“But hours earlier, senior members of the president’s economic team, privately addressing board members of the conservative Hoover Institution, were less confident. Tomas J. Philipson, a senior economic adviser to the president, told the group he could not yet estimate the effects of the virus on the American economy. To some in the group, the implication was that an outbreak could prove worse than Mr. Philipson and other Trump administration advisers were signaling in public at the time.”
MILLIONS FACE JOBLESS BENEFITS CLIFF — Our Eleanor Mueller and Rebecca Rainey: “A failure by Congress to enact a new economic relief package would prolong the pain of the coronavirus crisis for many Americans, but those without jobs face a special threat — millions could run out of unemployment benefits altogether by the end of the year.”
“The Senate reconvenes on Monday, giving lawmakers about two weeks to send legislation to Trump before the Nov. 3 election. But the sides are far apart … Meanwhile, the U.S. is inching closer to a Dec. 31 deadline when several key federal jobless aid programs created under the March CARES Act will be cut off entirely. If the government doesn’t pass legislation, more than half of those receiving unemployment benefits — about 13.4 million people — stand to be left with no income.”
COVID-19 AFTERMATH — Our Bjarke Smith-Meyer: “Governments need to focus on pulling people out of poverty and reduce the gap between rich and poor once the pandemic is under control, the International Monetary Fund said Wednesday.”
“The IMF’s advice came in its Fiscal Monitor report, which called on policies to ‘ensure social peace.’ It also suggested raising taxes on ‘highly profitable firms’ and investing in ‘low-carbon technologies.’”
QUARLES SIGNALS ACTION ON NON-BANK RISKS — Our Victoria Guida: “Financial Stability Board Chairman Randal Quarles … said the international body next month will release a plan aimed at increasing the role of market regulators in safeguarding the financial system against risks posed by nonbanks.”
“At an event hosted by the CFA Institute, Quarles said the FSB’s efforts to increase regulation of nonbanks had been stymied in part because market regulators, which oversee many nonbank financial firms, felt as if they were being ‘dictated to by the central banks.’ So, he said he is trying to create more of an even footing.”
BIDEN WANTS TO USE TRADE DEALS TO FIGHT CLIMATE CHANGE — Our Gavin Bade: “Biden and some Democrats in Congress want to use trade agreements to combat global warming, breaking from decades of U.S. trade policy that largely ignored climate change.”
“The move would add financial teeth to international pacts to reduce carbon emissions, which until now have relied on voluntary participation by the countries signing them. It would also mark a departure from the Trump administration strategy of boosting fossil-fuel exports.”
STOCKS FALL AS HOPES FOR A STIMULUS DIM— AP’s Stan Choe, Damian J. Troise and Alex Veiga: “Stocks gave up early gains and closed lower Wednesday, adding to Wall Street’s losses from a day earlier. The S&P 500 fell 0.7 percent after spending the morning swaying between small gains and losses.”
“Companies that rely on consumer spending, banks and technology and communication stocks bore the brunt of the selling. Trading in stock markets overseas was subdued as coronavirus counts climb around the world, raising the risk of more government restrictions on businesses. Treasury yields fell, while prices for crude oil and gold rose.”
And the recent profit rebound has failed to assuage wary shareholders — Bloomberg’s Lananh Nguyen, Michelle F. Davis and Sridhar Natarajan: “Bank profits are starting to resemble life before Covid, but investors aren’t buying the idea that the industry’s crisis has passed.”
“In earnings reports this week, the top U.S. firms said they already socked away most of what they will need to cover near-term losses on loans, and they’re still benefiting from a pandemic-fueled trading boom. Yet even as the five biggest banks reported a profit rebound in the third quarter, their stocks remained laggards.”
GOLDMAN’S PANDEMIC HOT STREAK CONTINUES IN Q3 — WSJ’s Liz Hoffman: “Goldman Sachs Group Inc. said Wednesday its third-quarter profit nearly doubled, the latest confirmation that even in a pandemic and a recession, Wall Street can still make money.”
“Goldman’s quarterly profit of $3.62 billion on revenue of $10.78 billion was better than stock analysts had forecast and sharply higher from a year ago. Since then, the global economy has crashed, political chaos has set in and interest rates have dropped to near zero — all things that should dent Wall Street profits.”
But not all banks were so lucky — Reuters’ Imani Moise and Noor Zainab Hussain: “Wells Fargo & Co’s profit plunged 57 percent in the third quarter, missing Wall Street’s expectations as persistent costs tied to its years-old sales practices scandal continued to haunt the bank. Like chief executives before him, new CEO Charlie Scharf, now one year on the job, has made cost cuts a cornerstone of his turnaround plan. He targeted $10 billion in savings annually over the long term, but investors are growing impatient.”
The earnings show diverging fortunes on Wall Street and Main Street — NYT’s Emily Flitter and Kate Kelly: “Hundreds of thousands of small businesses are closing for good. Temporary layoffs at larger companies are becoming permanent. But the country’s largest banks, which together serve a majority of Americans through loans, credit cards or deposit services, are not raising an alarm.”
“In their third-quarter earnings reports this week, big banks have said they are generally prepared for a wave of loan defaults they expect in the second half of next year. And their own fortunes are just fine: A trading and investment banking bonanza on Wall Street is helping them stay profitable.”
A LOOK AT TRUMP’S ECONOMIC STEWARDSHIP, BEFORE AND AFTER COVID — WSJ’s Jon Hilsenrath: “Donald Trump has presided over two economies during his time in office. In the first, which lasted until March, the economy reached historic milestones for jobs, income and stock prices. While it’s debatable whether it was the best U.S. economy ever, as the president has said, it was without question good and getting better for millions of Americans.”
“The second part, which arrived with Covid-19, was historically bad. It sent unemployment to depths unseen in post-Depression records before reversing itself quickly but only partially, leaving the U.S. with an outlook that’s especially hard to forecast. The two economies will be factors driving the choices voters make in November. The reality for Mr. Trump: Many achievements of his first economy have been wiped out by the second.”