All About the Trump Trade

Trump Trades in focus as election odds shift

Highlights

• Trump Trades in focus as election odds shift

• Employment data disappoint even with adjusting for hurricanes and strikes

• Fed guidance will be key as markets sniff out a potential January pause

• Price momentum and multiple expansion outpace fundamentals in driving U.S. equities higher

Key Takeaways

Fed Rate Cut and Market Focus

• As for the Fed this week, I think -25 basis points should be a lock, but the tone of the statement and at the Powell presser will be far more important than the actual move, especially now with the futures market 50-50 for the January meeting which is where the swaps curve believes a pause is coming.

Impact of Election Results on Markets

• Tomorrow’s election results are key for the markets. Unlike 2016, a Trump win this time doesn’t catch anyone by surprise, but there is no doubt in my mind that a GOP sweep is good for stocks and bad for bonds — as was the case in his first two years of one-party rule from 2016 to 2018.

Trump vs. Harris Sweep: Market Implications

• A Harris sweep is far worse for equities and since her fiscal plan adds half to the national debt as the aggregation of all of Trump’s policies, not to mention her intent to raise capital gains and corporate tax rates, that will surely dent the risk-on trade, and the bond bears are likely to be forced to cover their short positions.