In today’s briefing:
- Trump Trades Remain Intact, but Markets Will Not Offer Total Freedom on Fiscal Policy
- All Hail the Bullish Reversal
- Deciphering Trumponomics 2.0
- The Next Four Years…
- Iron Ore Tracker (25-Nov-2024): Waiting For Incremental Catalysts
Trump Trades Remain Intact, but Markets Will Not Offer Total Freedom on Fiscal Policy
- While US equities have already discounted better times under a second Trump administration, the dollar is continuing to appreciate based on better growth expectations, particularly versus the UK and Eurozone.
- After years of excessive regulatory requirements on banks, rumours are abound that the new Trump administration will revoke Basel 3 capital requirements to boost lending to the real economy.
- The Trump administration will face legislative barriers via filibusters. Financial markets will not give the second Trump administration an indefinite carte blanche with respect to any profligate fiscal policy conduct.
All Hail the Bullish Reversal
- The S&P 500 arrested its decline at its 20 dma and exhibited a bullish reversal and this reversal was confirmed by bullish internals.
- Our base case calls for a rally into year-end. The coming week is the start of the seasonally bullish period to year-end.
- One key risk is option sentiment, is showing signs of froth, though other sentiment indicators remain in neutral territory.
Deciphering Trumponomics 2.0
- Looking to 2025, market returns are likely to be more uncertain than in the past. The degree of dispersion in the range of forecasts is wider than usual.
- There will be winners and losers. Deregulation should benefit the energy, AI-related technology, and financials.
- Losers include bonds, and construction stocks because of their sensitivity to both rising rates and heightened labour costs from deportation.
The Next Four Years…
- The Republican sweep, both in Congress and the White House, seems to have sparked a risk-on attitude across financial markets of late
- But Republican presidencies have coincided more regularly with periods of post-war economic downturns
- And the disparate US equity market performance enveloping presidential cycles is a nagging puzzle
Iron Ore Tracker (25-Nov-2024): Waiting For Incremental Catalysts
- Iron ore prices were rangebound and maintained at over 100 USD/ton. In the last four years, they have been in a 95-130 USD/ton range.
- China TSF (Total Social Financing) disappointed the street with 1.4 trillion RMB (-24% YoY), compared to the street estimates of >1.5 trillion RMB.
- We believe that more significant lending numbers would catalyze the iron ore price, but till then, iron prices will remain stagnant at the 100 USD/ton level.
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