At the time of this writing, betting markets are predicting a 55% chance of a Republican Sweep. As stated many times, regardless as to who wins, the federal deficit must be addressed. However, an argument can be made until the markets experience severe volatility, the issue may not be addressed, and fiscal responsibility may remain less of a topic.
To place the current environment into perspective, NVDA’s capitalization is greater than the GDP of five of the G-7 nations and is trading over at an exponential 55x sales. The S & P 500 trades at 3.1x sales. TSLA increased more in value in one day the combined net worth of both GM and Ford.
This is insane but is not a $35 trillion deficit, a deficit that is growing by $2 trillion/year when the country is not war or recession coupled by rising interest coverage which will soon equal about 20% of the federal budget just as insane?
Many times, the most obvious conclusions are ignored. Is this an example of such an environment?
At this juncture I believe no such catalyst exists to address the deficit. Elected parliamentarians must first recognize the gravity of the debt situation before acting upon it. Writing the obvious, politicians respond to the incentives given them by the people.
There is always the possibility of a politician getting elected by not addressing the deficit and then committing political suicide to address it after their election. But in our complex democracy, I am skeptical even that could work unless 218 Congressmen/women and 51 Senators wanted to join them in the patriotic mission of career suicide.
The debt problem is actually a spending problem. And the spending problem is actually a size of government problem. And the size of government problem is actually a self-government of the people problem. Solve the crisis of responsibility; solve the debt problem.
Enough of Political Science 101, this is a busy week. Five of the mega caps post profits—MSFT, GOOG, AMZN, META and AAPL. How will the result be interpreted? Bloomberg writes that 75% of professionals polled believe the Magnificent Seven will exceed profit expectations. Wow! Talk about a high hurdle.
The economic calendar is comprised of many top tier releases. And then there is next week’s election.
Speaking of the economic calendar it is comprised of numerous tier I indicators including a sentiment indicator, the JOLTS Job Openings statistics, the Employment Cost Index, monthly PCE data, the ISM, Personal spending /income and the all-inclusive BLS employment report. How will the data influence monetary policy expectations.
Last night the foreign markets were mixed. London was down 0.32%, Paris up 0.03% and Frankfurt down 0.30%. China was up 0.68%, Japan up 1.82% and Hang Seng up 0.04%.
Futures are up about 0.4% ahead of a big earnings and data week. Oil is off about 5% following Israeli strikes on Iranian military infrastructure and talks of a cease fire. The 10-year is off 3/32 to yield 4.25%.
