The State of Markets: Trump Clean Sweep - All Change
A surprise election result overnight Tuesday generated some dramatic price swings over the course of last week. Trump and the Republican’s (likely) clean sweep of the Presidency, the Senate, and the House of Representatives (yet to be finally called) was a surprise to almost all election forecasters (who expected a very ‘tight race’). As a result, asset prices shifted sharply over the course of the week. The US small and mid-cap indices rose dramatically (closing the week up 8.6%); the main US large cap equity indices also performed well (NDX100 & S&P500); while, perhaps surprisingly for the bond vigilantes, US Treasuries were largely unchanged on the week (with US 10-year yields, for example, closing on Friday at 4.30% versus 4.37% yield on the prior Friday). The dollar also ended the week largely unchanged, while gold & silver were both down sharply (after strong bull runs in recent months) – see chart below.
The clean sweep will usher in a new economic agenda, which will have both positives and negatives. From the stock market’s perspective, Trump’s agenda will be deregulatory, will ease up on banks’ capital and regulatory regime, and will include fiscal stimulus/lower corporate tax rates. On the negative side, a stronger tariffs regime is about to be introduced. In this week’s ‘Longview from London’ (available on Substack https://chriswatling.substack.com/) we explore the costs and likely playbook of a Trump Tariffs agenda.
Next week remains busy (although it’s unlikely to be as dramatic as last week!). The focus will be on US consumer price inflation (on Wednesday). US producer price inflation is also released next week (Thursday); while there’s a China theme to the global macro data (with Chinese monthly lending, retail sales, new home prices, fixed asset investment and so on, published during the week). Elsewhere the Fed publishes its latest ‘Senior Loan Officers’ Survey’ (with an update on the state of credit conditions), while in the UK the Chancellor will deliver the annual Mansion House speech (on Thursday evening). Fed’s Powell & Williams will also both be speaking on Thursday (post last week’s Fed meeting). For a full list of next week’s events (in summary and by key region) please see below.
Key chart: Weekly performance (% return) – various key assets
Upcoming important data/events this week:
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Events: |
Speech by the Fed’s Powell at event in Dallas (Thurs, 8pm); speech by the Bank of England’s Bailey at the annual financial and professional services dinner (Thurs, 9pm). UK Chancellor Reeves gives Mansion House speech (Thurs evening). |
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Monday: |
N/A |
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Tuesday: |
US NFIB small business optimism (Oct, 11am); UK employment, jobless claims & average weekly earnings (Sept/Oct, 7am). |
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Wednesday: |
US headline & core CPI (Oct, 1:30pm). Chinese total social financing, new yuan loans, and M0, M1 & M2 money supply – (Oct, time tentative). |
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Thursday: |
US headline & core PPI (Oct, 1:30pm). |
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Friday: |
Chinese new & used home prices (Oct, 1:30am); Chinese activity data (Oct, 3am); US retail sales (Oct, 1:30pm). |
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Key earnings: |
Home Depot, AstraZeneca (Tues); Cisco (Wed); Walt Disney, Applied Materials (Thurs).
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Key Research
Monthly Global Asset Allocation No. 53, 5th November 2024:
“BUY Bonds -> Pain Trade Ahead A.k.a. Move OW US Treasuries (from NEUTRAL)”
US Treasuries have sold off sharply in recent weeks. In particular, the 10 year yield has risen sharply from 3.63% to 4.31% in the past 8 weeks, and is now above its 200 day moving average. There are a number of good reasons for that move. US macro data, for example, has been better than expected (see the Citi surprise index) and the rates market has therefore priced out some of the Fed cuts (i.e. 85bps worth of cuts by year end 2025).
Key North American macro data & events:
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Events: |
Speeches by the Fed’s Waller at Banking conference (Tues, 3pm), Barkin in Baltimore (Tues, 3:15pm), Harker on fintech and AI (Tues, 10pm), Barkin at Salisbury-Wicomico Economic Development (Tues, 10:30pm), Logan at Energy conference (Wed, 2:45pm), Musalem on the Economy and monetary policy (Wed, 6pm), Schmid at Energy conference (Wed, 6:30pm), Barkin discusses the Economy in Fireside chat (Thurs, 2:15pm), Powell at event in Dallas (Thurs, 8pm) & Williams at NY Fed event (Thurs, 9:15pm). |
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Monday: |
N/A |
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Tuesday: |
US NFIB small business optimism (Oct, 11am); Canadian building permits (Sept, 1:30pm); US New York Fed 1 year inflation expectations (Oct, 4pm); US Senior Loan Officer Opinions survey (Tues, 7pm). |
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Wednesday: |
US headline & core CPI (Oct, 1:30pm); US monthly budget statement (Oct, 7pm). |
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Thursday: |
US headline & core PPI (Oct, 1:30pm); US weekly jobless claims (1:30pm). |
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Friday: |
Canadian manufacturing & wholesale sales (Sept, 1:30pm); US Empire manufacturing (Nov, 1:30pm); US retail sales (Oct, 1:30pm); US import & export price index (Oct, 1:30pm); Canadian existing home sales (Oct, 2pm); US industrial & manufacturing production & capacity utilisation (Oct, 2:15pm); US business inventories (Sept, 3pm). |
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Key earnings: |
Home Depot, Occidental (Tues); Cisco, Copart (Wed); Walt Disney, Applied Materials, Palo Alto Networks, Ross Stores (Thurs). |
Fig B: US core CPI ex. shelter (M-o-M %)
Key European macro data & events
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Events: |
Speeches by the ECB’s Rehn at UBS European Conference 2024 (Tues, 8am), Centeno at a conference about Portugal's economic development (Tues, 9am), Cipollone on financial sanctions at Global Research Forum (Tues, 2pm), Schnabel in Washington (Thurs, 6:30pm) & Lane at seminar `A Fragmenting Trading System: where we stand and implications for policy'(Fri, 3pm) & Cipollone at CER Ditchley Park conference (Fri, 3:15pm); ECB minutes from October meeting (Thurs, 1:30pm); Riksbank minutes from November published (Wed, 8:30am). |
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Monday: |
N/A |
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Tuesday: |
German headline CPI (October final estimate, 7am); German & Eurozone ZEW survey – expectations & current situation (Nov, 10am). |
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Wednesday: |
French unemployment rate (Q3, 6:30am); Eurozone industrial production (Sept, 10am). |
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Thursday: |
Spanish headline & core CPI (October final estimate, 8am); Eurozone GDP (Q3 second estimate, 10am); Eurozone employment (Q3 first estimate, 10am). |
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Friday: |
French headline & core CPI (October final estimate, 7:45am); Italian general government debt (Sept, 9:30am). |
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Key earnings: |
Assicurazioni Generali (Fri). |
Fig C: Eurozone ZEW survey – expectations (index)
Key UK macro data & events
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Events: |
Speeches by the Bank of England’s Mann at BNP Paribas’ Global Markets Conference (Wed, 9:45am) & Bailey at the annual financial and professional services dinner (Thurs, 9pm); Chancellor Reeves gives Mansion House speech (Thurs). |
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Monday: |
N/A |
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Tuesday: |
Employment, jobless claims & average weekly earnings (Sept/Oct, 7am). |
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Wednesday: |
N/A |
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Thursday: |
RICS house price balance (Oct, 12:01am). |
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Friday: |
Monthly GDP estimate, industrial & manufacturing production, goods trade balance & construction output (Sept, 7am). |
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Key earnings: |
AstraZeneca (Tues); 3I Group (Thurs). |
Fig D: UK RICS house price balance (index)
Key Asia-Pacific macro data & events
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Events: |
RBNZ publishes financial stability report (Mon, 8pm); RBA policy decision (Tues, 3:30am); BOJ publishes minutes from September meeting (Tues, 11:50pm); speech by the RBA’s Jones at the FINSIA (Fri, 2:45am); market holiday in Japan on account of Culture Day (Mon). |
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Monday: |
Australian headline CPI (Oct, 12am); Australian ANZ-Indeed job advertisements (Oct, 12:30am); Australian Judo Bank service sector PMI (October final estimate, 10pm); Japanese money supply (Oct, 11:50pm). |
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Tuesday: |
Chinese Caixin service sector PMI (Oct, 1:45am). |
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Wednesday: |
Japanese Jibun Bank service sector PMI (October final estimate, 12:30am); Japanese cash earnings (Sept, 11:30pm). |
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Thursday: |
Australian imports/exports & trade balance (Sept, 12:30am); Japanese household spending (Sept, 11:30pm); China imports/exports & trade balance (Oct, 3am). |
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Friday: |
Japanese ESRI leading index (September first estimate, 5am). |
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Key earnings: |
Westpac Banking (Mon); Nintendo, Mitsubishi Heavy Industries (Tues); Itochu Corp, Honda Motor (Wed); Nippon Telegraph & Telephone corp, National Australia Bank (Thurs); Sony, SoftBank Corp, AN Holdings (Fri). |
Fig E: Chinese total social financing (CNY, trillion)
Last week:
Longview on Friday, 8th November 2024:
“Regime Shifts, Trump & Risks to the Bull Case”
Longview ‘Tactical’ Alert No. 86, 6th November 2024:
“Move Tactically Overweight Equities A.k.a. Expected Republican ‘clean sweep’ is stock market & growth friendly”
Tactical Equity Asset Allocation No. 250, 5th November 2024:
“Markets (& Models) -> Primed A.k.a. Awaiting Election Outcome”
Monthly Global Asset Allocation No. 53, 5th November 2024:
“BUY Bonds -> Pain Trade Ahead A.k.a. Move OW US Treasuries (from NEUTRAL)”
Prior week:
Longview on Friday, 1st November 2024:
“Equities, Bonds, & The US Election”
Global Macro Report, 31st October 2024:
“UK Losing Fiscal Discipline: Does it Change the Macro Theme?”
The SHORT VIEW (& market positioning), 29th October 2024:
“‘US Election Trades’ – Overcooked?”