HiddenLevers War Room: Post-Election Chaos

1. Post-Election Chaos
12 November 2020

2. WAR ROOM
Idea Generation
Macro Coaching
Scenario Updates
HiddenLevers runs on SCENARIOS like Instagram runs on PHOTOS
Fed Underwrites EconomyClimate DisastersReal Estate “Post” CovidTrump Agenda

3. SCENARIO PULSE CHECK
BLACKSWAN
S+P 500
2900
-5%
S+P 500
3750
+23%
S+P 500
3300
+10%
BASELINE
GOOD
COVID 2.0 – GOOD 85% PRICED IN ELECTION CHAOS – GOOD 100% PRICED IN

4. sources: MarketWatch, HiddenLevers
ECON PULSE CHECK
TRAVEL + HOSPITALITY UNEMPLOYMENT
Weekly Jobless
Claims just above
2009 peak
Jobless claims
falling slowly
Retail Sales
Positive
HOME + RETAIL
Key Indicators trending down from Q3 – recovery holding without stimulus but for how long?
(-4.5% at 9/30)
(-62% at 9/30)
(+25.1% at 9/30)

5. $1.4T compromise can meet actual needs
sources: US BEA, US Treasury DataLab, Brookings, HiddenLevers
Stimulus NEED = $1.4T
• $3.1T (15%) of the economy badly impacted
• $1.2T annual losses in Vulnerable sectors
• $200B in lost state/local tax revenue
GDP Breakdown: Winners+Losers
2019 2020
Autos + WFH
+14%
Structures +
Planes
-17%
GDP
-$600B AFTER
$3T stimulus
Travel + Hotels
-24%
Change vs Q4 2019
McConnell Bid
$5-600B targeted
Pelosi Ask
$2.2T broad plan
POST-ELECTION STIMULUS

6. sources: HiddenLevers, Alliance Bernstein, Wikipedia
Bush 41 / Clinton / Obama / Trump – All experienced gridlock with positive market returns
Trump/Dem House
+ 48%
Biden + GOP Congress
Biden + Split Congress
Biden + Dem Congress
Gridlock = Govt Inaction
Happy Markets
(No Agenda + No Tax Changes)
You Are
Here
Post-Election Gridlock
exec
senate
house
DEM
GOP 50/48
DEM 218/202
Avg. S&P Returns since 1928, based on Gov’t Control
You Are Here
POST-ELECTION GRIDLOCK WELCOME

7. sources: HiddenLevers, Wikipedia
H.W Bush / Dem House
+ 49%
Clinton / GOP House
+ 112%
Obama / GOP House
+ 97%
POST-ELECTION GRIDLOCK WELCOME
Biden + GOP Congress
Biden + Split Congress
Biden + Dem Congress
Gridlock = Govt Inaction
Happy Markets
(No Agenda + No Tax Changes)
You Are
Here
Post-Election Gridlock
exec
senate
house
DEM
GOP 50/48
DEM 218/202
Bush 41 / Clinton / Obama / Trump – All experienced gridlock with positive market returns

8. POST-ELECTION TOXIC LAME DUCKS
sources: HiddenLevers, American Prospect, New Yorker, Vice, USA Today
1932 – HOOVER / GREAT DEPRESSION 1974 – NIXON / WATERGATE + OIL CRISIS 2020 – TRUMP / PANDEMIC BLINDNESS
Toxic or Theater?
Follow the Money
- Trump has several campaign debts
- Cultivating base is highly lucrative
- Partisan media opportunities
- Lay groundwork for 2024 comeback
What is a toxic lame duck? POTUS who has become destructive / willfully blind to harm
Transition DD -13% Transition DD -10%

9. VACCINE MARKET IMPACT
sources: HiddenLevers,sources: HiddenLevers, Google Finance, TradeStation, Business Insider
AIRLINES / LIVE EVENTS / TRAVEL / HOTELS
ENERGY / COLD STORAGE / LEGACY RETAIL
FINANCIALS / MALL REITS / GE / BOEING
CLOUD TECH / REMOTE WORK ENABLERS
ATHLEISURE / ECOMMERCE / PAYMENT TECH
STREAMING CONTENT / SOCIAL MEDIA
WINNERS - VALUE LOSERS - GROWTH
ROTATION OR WISHFUL THINKING?

10. sources: HiddenLevers,sources: HiddenLevers, Business Insider
NASDAQ MOONSHOTS
NASDAQ
12K
+12%
VACCINE + ELECTION ECON IMPACT
GOOG rising on anti-trust theater
Early Vaccine = End of WFH Era / Tech Control
replaces

11. sources: HiddenLevers,sources: HiddenLevers, Forbes, US Chamber of Commerce
PANDEMIC RECESSION
VACCINE + ELECTION ECON IMPACT
NO VACCINE = K-SHAPED RECOVERY

12. POST-ELECTION CHAOS SCENARIO REPLACEMENT
Decides
Senate
Majority

13. POST-ELECTION CHAOS GOOD
Record infections
provide urgency
Dems hardline
posture eroded
Political theater
season is over
Bipartisan
Stimulus
S+P 500
3500
+5%
10Y
1.10%
(+13bps)

14. POST-ELECTION CHAOS BASELINE
Unemployment
6.9%
Recovery better
than expected
No urgency
before Jan runoff
Govt Inaction
S+P 500
3500
FLAT
10Y
0.90%
(-8bps)

15. POST-ELECTION CHAOS BAD
Stimulus + Covid
being ignored
Exec refusing any
transition effort
Trump likely just
cultivating base
Toxic Lame DuckToxic Lame Duck
S+P 500
3200
-10%
10Y
0.84%
(-14bps)

16. GOOD
S+P 500
3200
-10%
S+P 500
3900
+9%
S+P 500
3500
FLAT
BAD
TRUMP UNDOES THE
CERTAINTY CREATED BY
CLEAN ELECTION RESULT
GOP + DEMS MEET IN THE
MIDDLE AT $1.4T TO COVER
ACTUAL PANDEMIC DAMAGE
SLOW RECOVERY CONTINUES
DESPITE
PARTISAN DYSFUNCTION
POST-ELECTION CHAOS MACRO RISK PARITY
NASDAQ
11.6K
FLAT
BASELINE
10Y
0.84%
(-14bps)
10Y
1.10%
(+13bps)
10Y
0.90%
(-8bps)
NASDAQ
12.7K
+7%
NASDAQ
10.3K
-12%
Toxic Lame Duck
Bipartisan
Stimulus
Govt Inaction

17. POST-ELECTION CHAOS BLACKSWAN
sources: WSJ, Billboard, BizJournals, CNBC, CNBC 2
MALL OWNERSRESTAURANTSTRAVEL
EXPOSED SECTORS DEFAULT
LIVE EVENT VENUES
43 carriers + Hertz failed
in 2020. More failures
expected in Q4 with no
stimulus.
Sizzler, Chuck E Cheese,
Le Pain Quotidien, Il
Mulino, Ruby Tuesday –
all bankrupt.
EVOLUTION
Dunkin, Chipotle, etc.
buying up struggling
indie restaurants.
People not attending live
events. Lockdowns bankrupting
sports teams, artists.
EVOLUTION
Key players integrating digital
health passes into ticket apps
and doing drive in events.
Mall REITs can’t service debt
as retail tenants move out.
EVOLUTION
Landlords becoming more
flexible or converting away
from retail.

18. Trump transition refusal is optics, likely ends soon
Covid vaccine mostly priced in, hurts tech
Congressional stimulus urgency non-existent
before 05 Jan Georgia Runoff Elections
Divided government de-risks DC for markets
POST-ELECTION CHAOS WHAT TO SAY