Investors woke Thursday morning to the aftermath of a sharp selloff in stocks across North American markets, including the TSX. Everything from energy drag to Aphria’s earnings was cited by pundits. The pandemic, the economy, and overvaluations also got a look-in.
But anybody glued to social media Wednesday night will have been aware that something potentially more dangerous to the markets just happened. Wednesday saw the Joe Biden campaign become embroiled in an apparently concerted effort by Facebook and Twitter to squash a story by the New York Post.
It was the first real sign that the Democrat bid for the White House could be vulnerable to a smear campaign. But the attempt by “big tech” to mute a story in the press — warranted or not — has left observers at both ends of the political spectrum with a bad taste in their mouths. It might have affected the markets, too.
Thursday saw the TSX Composite Index down 0.79% at the open. It’s up to historians to gauge how much of that dip was caused by falling oil prices (U.S. crude was down 3.5%, and Brent lost 3.1%) and the worsening pandemic. With a potential Black Swan event imminent, Thursday’s contraction could have been at least partially caused by something other than weak oil and the threat of further lockdowns.
The U.S. election is everything
As investors will almost certainly find out in just a few weeks, the fight for the White House has the power to make mincemeat of the markets. Both sides fully expect to win. This means that, no matter what the outcome is, whole swathes of the market will be blindsided. The start of the month gave startled investors a taste of Republican vulnerability when President Trump was hospitalized with the coronavirus.
And now Wednesday might have handed investors a sign of how the markets could react to Democrat vulnerability. We’ve already seen huge gains in pot stocks on the back of just four words spoken by Senator Kamala Harris during her debate with VP Mike Pence. So, we know that the markets are receptive to the Biden campaign. Therefore, if the Thursday selloff had anything to do with the “big tech” controversy, the markets could really be in trouble.
At the very least, it’s arguable that the selloff this week was not just about oil. As of Thursday, Canadian Natural Resources was positive by 6.8% over five days. As a bellwether for beleaguered Canadian hydrocarbon stocks, this is not indicative of an oil-based selloff. Indeed, Canadian oil and gas stocks were overall just about positive for that period. Conversely, renewables were overall slightly negative — again, not suggestive of an oil stock rout.
Meanwhile, Thursday saw the Horizons Marijuana Life Sciences ETF fall 3.1%. HEXO lost 4%, while the aforementioned Aphria dropped 18%. The post-earnings comedown theory is credible and certainly accounted for much of the red ink in pot stocks Thursday. However, it’s also plausible that Aphria’s woes are masking the possibility that certain parts of the market got a rude awakening Wednesday night.
