For today’s literary wisdom, I bring you this passage from Through the Looking-Glass, by Lewis Carroll:

“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean, neither more nor less.” “The question is,” said Alice, “whether you can make words mean so many different things.”

As the November 3 general election gets closer, Americans are taking a voyage through the looking glass, where nonsense is the norm. Below, I dig for the facts on which you can base your investment decisions.

Let’s start with the hard scientific data. Coronavirus infections and deaths are soaring at an alarming rate. Daily COVID-19 cases in the U.S. exceeded 90,000 as of Friday morning, the greatest number of new cases in a single day since the pandemic began.

In Europe, the pandemic is spiraling out of control. Germany and France on Thursday announced partial lockdowns due to a resurgence of the virus in those countries. Business and social restrictions begin in France today and in Germany on November 2. The negative consequences for the global economy are sure to be enormous.

And yet, we’re hearing on the campaign stump in America and from pundits on financial television that the pandemic is on the wane and precautions such as masks are unnecessary. Millions of unemployed Americans can’t pay for housing, food or medical care, but the bulls are cheering a supposed economic recovery. Through the looking-glass, indeed.

To be sure, the latest U.S. economic data is positive on the surface. But let’s put the numbers in deeper context.

The U.S. economy expanded at an unprecedented pace in the third quarter, largely because the first coronavirus relief bill boosted consumer spending. According to the U.S. Commerce Department on Thursday, Q3 gross domestic product (GDP) grew at a 33.1% annualized rate (see chart).

The GDP report topped expectations. It’s the last economic scorecard due for release before the November 3 election, so it’s getting a lot of spin from politicians. But keep in mind, the rebound in Q3 GDP followed a 31.4% contraction in the second quarter, the deepest since the government started keeping records in 1947. I like to play poker, so I’ll use this analogy: It’s like losing $100 and then getting back $60. You’re still behind.

But Wall Street was cheered by the GDP data, as partisans called it an “economic miracle.” On Thursday, the Dow Jones Industrial Average rose 139.16 points (+0.52%), the S&P 500 climbed 39.08 points (+1.19%), and the tech-heavy NASDAQ soared 180.72 points (+1.64%).

Big Tech: Good, but not good enough…

A flurry of earnings reports arrived Thursday night from five mega-cap technology companies and investor reaction was negative, even though the operating results were generally positive.

Apple (NSDQ: AAPL), Alphabet (NSDQ: GOOGL), Amazon (NSDQ: AMZN), Facebook (NSDQ: FB), and Twitter (NYSE: TWTR) all reported after the closing bell yesterday and they mostly beat expectations on the top and bottom lines, but sentiment during the worsening pandemic has turned against Big Tech.

When valuations are high, sometimes good isn’t good enough. There were enough disappointments amid the results (e.g., Apple iPhone revenue missed estimates) for analysts to deliver a thumbs down, weighing on tech shares and the broader market in overnight trading. Silicon Valley’s luster has worn thin.

In pre-market futures trading Friday morning, the three main U.S. indices were set to open deeply in the red. The Dow was down as much as 400 points before the opening bell. Week to date (as of Friday morning before the open), the Dow is down 5.9%. European stocks have been sliding since the new lockdowns were announced on the Continent.

Investors hoping for a fast and full recovery are deluding themselves. Coronavirus deaths and lockdowns have left long-term scars on the economy and society. Sure, parts of the economy have reopened, but tens of millions of people have lost their jobs and industries such as retail, tourism, hospitality, and entertainment will take many months (if not years) to recover.

Some industries, such as airline travel, will never be the same. Shopping malls are ghost towns. Streaming video has put a stake through the heart of physical movie theaters. Restaurants will shutter their doors during the cold winter. Jobs in those sectors are gone forever.

An increasing number of “temporary” layoffs have become permanent. For many people lucky enough to still have a job, their paychecks are getting reduced. Further fiscal stimulus is dead for now, which means financially distressed households aren’t getting help. Consumer spending is likely to tumble.

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In a separate report from the Labor Department on Thursday, initial claims for state unemployment benefits fell 40,000 to a seasonally adjusted 751,000 in the week ending October 24. Including a government funded program, 1.1 million people sought unemployment benefits last week.

Initial jobless claims have dropped from a record 6.867 million in March, but they still hover well above their 665,000 peak witnessed during the 2007-09 Great Recession. About 22.7 million Americans were receiving unemployment benefits in early October.

The nightmare scenario…

You’ve heard this phrase many times before and it’s true: the stock market is not the economy. The market is forward looking and I’m optimistic about the global economy’s prospects next year. But between now and then, the road is strewn with landmines.

Wall Street is comfortable with either candidate winning the White House next Tuesday. If Donald Trump wins re-election, taxes stay low and deregulation continues. If Joe Biden wins, massive stimulus is likely. It’s a win-win for the investor class. Remember, Wall Street gives huge campaign contributions to both political parties.

The nightmare scenario for investors? If the election is disputed and the final outcome is held in abeyance. If that happens, investors probably will run for the exits. Until this anxiety-wracked election is over, the stock market is vulnerable.

But you can still profit. For our special “election trade” that’s positioned to make big money no matter how the November 3 election turns out, click here.

John Persinos is the editorial director of Investing Daily. Send your questions or comments to mailbag@investingdaily.com. To subscribe to John’s video channel, follow this link.