Is Donald Trump the ultimate comeback kid? Love him or hate him one has to be in awe of his determination and perseverance to overcome. Life is indeed stranger than fiction. Not even the greatest Hollywood writer could envision the events of the last nine years.
Perhaps of even greater significance is the make-up of the Senate. The Republicans control at least 51 seats and it is not unfathomable they could control as many as 54 seats. The odds favor that the President’s cabinet choices and the like will have no great issues of getting approved.
The makeup of the House is still not yet known but it is believed the Republicans will continue to control the Lower Chamber by the slimmest of margins.
Both candidates have made it a contest of competing catastrophisms, including the survival of democracy itself. Fighting over these existential issues, both candidates appear to agree on only one thing—the humdrum norm of competent governance is beside the point.
Chief amongst them is fiscal responsibility. It is no longer unthinkable that a major fiscal crisis could unfold yet it is hard to recall an election that ignored the issue or an election that overtly pandered on taxes and public spending that is so unrestrained.
Writing it differently, the current policy scenario—both current and projected—is unsustainable. The question is not whether such accumulation of debt will stop but when and how much collateral damage will occur. Far from grappling with this looming crisis, both candidates have promised to ignore it all together.
Commenting on yesterday’s market activity, the service sector expanded in October at the fastest pace in over two years, fueled by a pickup in hiring. The figure topped all but one forecast. The ISM employment sub index is now the highest since August 2023. Further job gains, paired with low employment and limited layoffs, would support the ability to keep spending in the months ahead.
The prices paid index also rose which supports the notion that the economy is still experiencing boomflation…strong nominal growth as well as inflationary pressures.
The bond market sold off on the data, however the futures market is still anticipating an interest rate reduction on Thursday as well as in December. Is this realistic?
Equites also advanced. Bloomberg writes “stocks advanced as voting got underway in a presidential race that will have major consequences for the future of economic policy.”
Markets for now seem to be broadly following the contours of the much-debated Trump trade—with Treasury yields, crypto and stocks are rising.
At the time of this writing [Tuesday evening] the “betting markets” are suggesting a 65% probability Trump will be elected and a 61% probability of a “red sweep.”
What indicator is more accurate—the polls or the betting markets?
Bloomberg writes the S & P is “famously buoyant” in the session when presidential votes are cast, rising nine of the last 11 election days.
Attention may now be focused upon the outcome of tomorrow’s FOMC meeting. As stated, the market is suggesting another 25-bps cut will occur. Perhaps the only certainty to write that if one does not occur, volatility may rise.
Last night the foreign markets were mixed. London was up 0.975%, Paris up 0.79% and Frankfurt up 0.40%. China was down 0.09%, Japan up 2.61% and Hang Seng down 2.23%.
The markets should open considerably higher on the election outcome believing there will be “dramatic policy and economic change under the new Administration” according to Bloomberg that will unleash inflationary fueled growth. Perhaps it will be boomflation on steroids as there are only two ways to overcome massive debt….inflationary growth or restructure. Restructuring is not an option given the US dollar and Treasury are the global benchmarks.
The 10-year is off 1 ½ points to yield 4.49%.
