Sargon's Corner - A bright cloud in the gloom

Just when we thought politics and stock markets couldn’t get any more unpredictable, October looks like being even more turbulent than what has already been a remarkable, pandemic-blighted year. But at least some US market experts are predicting an improvement by year end.

LPL Financial Markets’ senior strategist Ryan Detrick was quoted by Market Insider as suggesting the current volatility could set the US market up for gains. In a recent note, he cited historical data indicating that during presidential election years, October was the worst month for markets. "The third quarter is usually weak, but when it is really strong, like it was in 2020, this says the rally isn't over yet," said Detrick.

The US elections are undoubtedly a key factor, and markets are closely watching the outcome of the US president’s recent Covid-19 diagnosis and its impact on the hotly contested presidential polls. However, what may be of more concern with the elections in such close proximity is that the US is heading into the worst job losses on record, according to a recent CNN report. The number of the unemployed now classified as having lost their old jobs permanently has surged to a seven-year high of 3.8 million, according to seasonally adjusted numbers from the Bureau of Labor Statistics, cited by CNN. On the plus side, the US has recovered more than half of the jobs lost during the pandemic. But there are indications the jobs market recovery is slowing and may face permanent scarring from the pandemic. Fitch Ratings’ Brian Coulton was quoted by CNN as saying: "The easy part of the labor market recovery is largely behind us now."

However, one brighter spot during the pandemic remains the tech sector. And in particular, with businesses relying on technology more than ever, it has been time for cloud computing to flourish. "Everyone had almost a Black Friday level of stress on their IT," said Hillery Hunter, chief technology officer of IBM (IBM) Cloud, of the early days of the pandemic, in a CNN report.

Cloud technology has become essential to helping manage business disruptions and develop new digital technology and the pandemic has made cloud computing even more crucial. Julia White, corporate vice president of Microsoft (MSFT) Azure, said: "Retailers who had a great e-commerce platform did much better than those who did not.”

As a consequence, an increasing number of companies are investing in moving to the cloud, in spite of global economic concerns.

Research firm Gartner recently suggested it expected the public cloud market to be a "bright spot" in technology despite an expected decline in overall IT spending this year. We could all use a few bright spots as we head into the last quarter.

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Sargon Elias is a multi-decade veteran of financial markets with experience spanning across the globe. He is currently CEO of Rockfort Markets.