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Western economies continue to embrace restrictions and control. This will result in rising domestic social unrest, while politicians look for scapegoats abroad. Many traders believe a Trump victory will send stocks higher, but price, valuation cycles, and the growing civil unrest that's highly likely after the election, could send stocks lower for longer than people expect. Market hates uncertainty.
Nothing spells uncertainty like civil unrest. We will be watching the dividend yield cycles and reversals as the end of the year approaches. Leading markets cannot take out lower reversals and maintain mark up or cause building. Mark down is still a possibility in 2021 and 2022.
S&P 500 and VIX correlations are rising again. Rising correlations are usually a function of dislocation between price and risk. The selling might not be done since the spike that began in early September never had a chance to restore the traditional inverse relationship. Inexperienced traders loaded up with call options likely explain a part of this ongoing distortion.
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