with big swings in the vote tallies in big states.

The atmosphere of excitement and uncertainty

is captured nicely in the roller coaster in Nasdaq index futures

as the evening wore on.

The ride remains wild on Wednesday

with both candidates seeing a path to election

as the final votes are tallied.

The outcome is going to depend on absentee ballots cast

in just a few swing states, such as Pennsylvania.

But just because the presidency still hangs in the balance

it does not mean that we have not learned anything at all.

One thing is becoming increasingly clear.

The Democrats' hopes of adding to their majority in the House

of Representatives and flipping the Senate

look likely to be dashed.

This means that the most popular market narrative leading up

to this election is not going to play out.

This was the so-called 'blue wave' reflation trade.

The story went like this.

With Democratic control of all three branches of government

there would be huge fiscal spending, higher inflation,

higher interest rates, and finally higher stocks.

But despite the 'blue wave' scenario not playing out,

stocks rose nicely on Wednesday morning.

Was the reflation trade narrative just a convenient

post hoc justification for a market that

was determined to rise anyway?

Perhaps not.

If you look at 10-year Treasury yields on Wednesday morning,

they did fall just as the failure of the 'blue wave'

scenario would have predicted beforehand.

As a result, cyclical stocks and most prominently banks,

the most cyclical of all, are getting hammered,

which is exactly what the failure of the 'blue wave'

thesis would have predicted beforehand.

So why then is the market as a whole doing so well?

Well, look at who is leading the market up.

It's technology and specifically the biggest tech stocks.

Once again, the so-called FANG stocks

are leading the market, which is a return to the status

quo of the last few years.

And given a very mixed election result, what else would you

expect?

Some days, even when the world is going mad,

markets make good sense.

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