With investors peering down the stimulus wishing well, US stocks have remained perilously perched but onside for the day.

The hope is that the US Congress would reach an agreement on a spending package to brace American households and businesses against the economic fall out from the pandemic as a third coronavirus surge has unswervingly taken hold across much of the United States.

With about 1 million people now tested on many days, the country is getting a far more accurate picture of how extensively the virus has spread than it did in the spring.

And for market concerns, it is not painting a favourable image for the year-end economic outlook.

The absence of a stimulus package would most certainly see US economic growth on the back-foot heading into year-end and could drag stocks and growth assets down the Covid-19 vortex as well.

Value is leading the US equity market rally on Tuesday as stimulus and vaccine headlines push Travel and the Reopening trade higher.

Volumes are very light –suggesting that many investors choose to sit the “on-again-off-again stimulus romance” from the comfort of the sidelines – so it does not take much to move this tape.

At times, given the lower liquidity profile, it looked like investors who ran with the bulls were unceremoniously forced to ride the cutting edge of a continually reorienting whipsaw.

Indeed, it was a day of multi-asset whipsawing. But also one at times laced with hope. US House Speaker Nancy Pelosi indicated that a pre-election stimulus deal is “possible” and struck a softer deadline tone as well, noting that for a stimulus bill to be voted on before the election, it needs to be finalized by the end of the week.

In these gnarly Covid-19 times, deadlines are meant to be broken if constructive progress is occurring. Provided both parties are talking, if there is a will, there is a way as the political calculus allows for a pre-election deal.

After all, what politician wants to be painted as voting for unemployment?

Vaccine trials to resume

It feels like there is a constant wall off money and even a systematic bid now with rates also higher, aiding a bit more rotation into Cyclicals and Value as investors continue to look beyond the election towards a post-vaccine environment after AstraZeneca’s highly touted Covid-19 vaccine trial in the US is expected to resume as early as this week.

The consensus might be that one should increase cyclical exposure. Still, positioning is not there yet as a speculative trade is not large because the event risk around the election is significant.

The outcome’s timing is not precise as perceptions are still blurred by 2016 when polls were wrong on Brexit and US President Trump.

Indeed, worrying about inaccurate pools feels like its the markets final mind war, but US election polls have only been wrong twice sine 1952.

The Blue Wave result has clear implications for a lower US dollar and most believe it to be bullish stocks (spending outweighs tax cuts). The market has bet on this outcome a bit but wants to bet much more. Out of all the various possible election outcomes, this is the only crystal-clear outcome for how asset markets respond.

Oil prices surged

If one growth asset remains tethered to the end of the stimulus yo-yo string, it had to be oil. Crude prices surged to a seven-week high on signs that US lawmakers are nudging closer to a stimulus deal. But the momentum got sapped after the API data indicated that US oil stockpiles rose last week bearish to consensus. Still, distillate inventories were down by about 6 million barrels, which could offset some of the headline gloom.

And bullish for oil markets is news that AstraZeneca’s Covid-19 vaccine trial in the US is expected to resume as early as this week after the US Food and Drug Administration completed its review of a severe illness, according to sources.

AstraZeneca’s large, late-stage US trial has been on hold since Sept. 6, after a participant in the company’s UK trial fell ill with what was suspected to be a rare spinal inflammatory disorder.

The economic outlook remains challenging for oil, though there is hope that the second Covid-19 wave (third in the US) will be less severe and an economic double-dip avoided.

And based on this view, this seems to be the favoured approach by OPEC+ as JMMC did not address whether the producer group might extend current quotas into 2021.

However, this is not the role of the Joint Ministerial Monitoring Committee (JMMC), but the market was still on the hunt for any excuse to sell.

Still, OPEC has set a clear precedent. It will likely take another proactive approach to manage oil markets, both at OPEC+ group level and through the individual actions of critical producers like Saudi Arabia.

If the ramp-up of Libyan production and the pace of the global demand recovery is a problem for the oil price, recent OPEC intervention activity suggests a strong chance of reacting.

Equity and oil market analysis from Stephen Innes, Chief Global Market Strategist at Axi