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Oct. 20, 2016, 9:40 a.m. EDT

Beware of betting against a favorite millennial pastime

Critical information ahead of the U.S. market’s open

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By Barbara Kollmeyer, MarketWatch

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Who can say no?

A small ripple of relief has crested across Wall Street on signs that the “nasty woman” didn’t blow last night’s debate.

That key presidential barometer, the Mexican peso /zigman2/quotes/210561814/realtime/sampled USDMXN -0.1914% , didn’t get that much of a lasting rise out of last night’s clash, and stock futures were in the black, at least until central banks snapped us out of our political stupor with some comments from ECB President Mario Draghi (see below).

A Hillary Clinton win has generally been seen as a more friendly outcome for Wall Street. But some say investors should just tune out the politics, at least until we get closer to the big day.

“Carry on as if it weren’t happening,” argues Closing Basis over at Slope of Hope . The financial blogger rounded up charts from the month of trade prior to a presidential election since 1992 and found no patterns whatsoever.

Not that this is an easy market even if we weren’t dealing with one of the most divisive presidential U.S. elections ever. The S&P 500 is trading in “no man’s land,” says Mark Newton, of Newton Advisors, in a post for See It Market .

While “a mild stabilization seems to have occurred in the last few days,” it’s not time to think stocks have bottomed out, he says, adding that it’s a tall order to expect stocks to return to highs into the election, given “disgruntlement yet no real fear/capitulation heading into a seasonally volatile last week of October.”

How tough is it out there? Well ask a value investor, like the one in our call of the day. Bronte Capital’s John Hempton is battered, but not beaten. Read on for more.

As for our chart, in at least one sector, millennials are calling the shots and we’d be wise to listen to them. See below.

Outside of earnings and some data, there’s a European Central Bank meeting to get through this morning. No change is expected, but Mario Draghi is sure to get a grilling at the press conference later on the process of tapering and any potential tantrum.

And away we go.

Key market gauges

S&P 500 futures  and Dow futures  turned tail and headed lower after Draghi said there has been no talk of extending quantitative easing for the region. Europe /zigman2/quotes/210599654/delayed XX:SXXP +0.30% are now in the red. That kicked the euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.1077%  up, but it’s now back under $1.10.

In Asia, the Nikkei closed up 1.4% to its highest level in six months, driven by a weaker yen /zigman2/quotes/210561789/realtime/sampled USDJPY -0.1431% . Watch the pound today as U.K. Prime Minister Theresa May addresses her first European Union summit. She’s also expected to calm some fears over a hard Brexit, say sources .

Oil /zigman2/quotes/209727031/delayed CLX26 0.00% has pulled back after a big run-up on Wednesday driven by supply data. (And check out this: Who’s better for the oil market? Clinton or Trump?) Gold is up marginally.

Read: Climate change is paying off big time for coffee investors

The call

Think it’s hard to find good stocks at a discount right now?

You’re not alone. Bronte Capital’s John Hempton discussed this very topic in his September letter to shareholders (h/t Value Walk ).

“Alas it’s a difficult time for value investors. Finding good companies trading below their true value — the daily business of a value investor — has not been easy. And by and large, our value-oriented longs have not performed,” he writes.

Hempton said long positions in Bronte’s Amalthea Fund have been mostly value stocks, but they’ve largely underperformed the market, while shorts have made money. The end result is small net losses, which he says isn’t a great turnout.

Even so, his shop is still actively looking for quality stocks to buy at a good price. He highlights two they’ve been buying — New Hampshire-based textiles and materials company Albany International /zigman2/quotes/208627197/composite AIN -3.53%  and British specialty chemicals provider Elementis /zigman2/quotes/206435094/delayed UK:ELM +0.14% /zigman2/quotes/204490591/delayed ELMTY -8.59%  .

Investors ought to consider betting against some stocks, rather than just staying on the sidelines, according to Hempton.

“One option would be to simply hold cash until the time when valuations are more appealing. But as we can find what appear to be highly attractive shorts, we much prefer these as they can actively generate cash when the market turns. The goal is to be well positioned when stocks become cheap,” Hempton says.

In other words, the pickings are slim, but hang in there.


EBay /zigman2/quotes/204653455/composite EBAY -3.56%  is down 7% after a weak holiday forecast with results late Wednesday. One question, if holiday shopping and StubHub can’t save eBay, then what can?

American Express /zigman2/quotes/203805826/composite AXP -1.38%   is up nearly 6% after an earnings and revenue beat, a big lifter And that’s been a big help for stock futures this morning.

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