Illustration: Eniola Odetunde/Axios

The market looks like it may be throwing another tantrum, investors say. But the cause is different this time around.

What's happening: This selloff is beginning to look like the 2013 taper tantrum, which roiled markets as U.S. government yields rose in response to an expected reduction of the Fed's quantitative easing (QE) program.

  • But this time it's the dollar rising in response to doubts about the Fed's ability to deliver on higher inflation and more market stimulus.

The big picture: Following the unexpected death of Supreme Court Justice Ruth Bader Ginsberg last week and the potential for an election meltdown, more investors are betting that additional fiscal stimulus from Congress is also not forthcoming.

  • It was a "kick in the head" for the market, says Richard Steinberg, chief market strategist at The Colony Group.
  • And it is now reversing this summer's gains in stocks and precious metals as traders unwind their bets for a reinflated economy and pile back into the dollar.

Why it matters: The selling across asset classes suggests the boost from the $2 trillion CARES Act and the Fed's $3 trillion QE infinity program have worn off, and without a new catalyst to reignite bullish momentum the overall trend will be for stocks to fall with very few assets moving in the opposite direction to provide safe havens.

By the numbers: The S&P 500 fell 2.4% and the Nasdaq dropped 3%; gold declined 2.6% with silver sliding 2.9% on Wednesday.

  • The dollar rose against all major currencies and gained more than 1% against most commodity-linked and emerging market currencies that tend to rise when markets favor risk-taking.
  • U.S. Treasury yields were little moved.
  • The S&P has fallen 9.6% from its Sept. 2 peak and the Nasdaq is down 11.8%.

Catch up quick: At its latest policy meeting last week the Fed said it would maintain its bond-buying at least at current levels, but did not promise further increases.

The bottom line: "By giving the market so much accommodation ... the Fed has essentially created a spoiled child where nothing’s enough and there always has to be more," Tom Essaye, founder and president of Sevens Research, tells Axios.

  • "We're in a mini feedback loop — the Fed is not going to do any more, the market has run a long way, tech is super overvalued, COVID seems to be coming back — and you get some momentum behind that and all of a sudden the S&P is down 10%."
  • "Where does it stop? From a fundamental standpoint, you could still see another 5% before you get to a level of valuation that makes sense."

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Dion Rabouin, author of Markets
Oct 20, 2020 - Economy & Business

Americans' trust in the Fed keeps falling

Data: Axios/Ipsos poll; Note: ±3.3% margin of error; Chart: Axios Visuals

Americans' trust in the Federal Reserve fell again in October, with just 34% saying they have a fair amount or a great deal of trust in the central bank in the latest Axios/Ipsos poll.

What's happening: While trust in the Fed rises with age, income level and among those who say they know more about the institution, there was not a single group where even half of respondents said they trusted the Fed.

Dion Rabouin, author of Markets
Oct 19, 2020 - Economy & Business

Short sellers are rushing back in

Data: S3 Partners; Chart: Axios Visuals

With the stock market again rising toward record highs, short sellers are moving back into technology shares and broad U.S. indexes with increasing confidence, betting that prices will fall and they will profit.

What's happening: After largely cashing out their bets at the end of the first quarter following the market crash in late March and pulling back in July and August, the renewed rise in stock prices has bears upping their bets again.

The cliffhanger could be ... Georgia

Illustration: Sarah Grillo/Axios

It hasn't backed a Democrat for president since 1992, but Georgia's changing demographics may prove pivotal this year — not only to Trump v. Biden, but also to whether Democrats take control of the Senate.

Why it matters: If the fate of the Senate did hinge on Georgia, it might be January before we know the outcome. Meanwhile, voters' understanding of this power in the final days of the election could juice turnout enough to impact presidential results.