Monday – October 4, 2024
UMBS opened up 38 bps. Nice! S&P futures are up 7.5 points.
The upcoming week won’t have a lot of important economic data, but we have the election and the FOMC meeting. The FOMC meeting will take place on Wednesday and Thursday, with the announcement and press conference on Thursday,
Will the election move markets? Probably too soon to tell, and a lot will depend on who controls Congress. At the margin, Trump is more likely to use sticks versus carrots with trading partners, which would be probably be more inflationary than Harris. That said, the difference probably won’t be dramatic.
The Bloomberg Dollar Spot Index slid as much as 0.7%, while the yield on 10-year Treasuries dropped 10 basis points to 4.28%, after a new poll suggested traders may be underestimating the prospect of a win for Democrat Kamala Harris. The Mexican peso — which has suffered from Trump’s talk of tariffs — was one of the biggest gainers among major currencies. Bitcoin, which has climbed on Trump’s support of cryptocurrencies, slipped.
The moves signal a widespread re-evaluation of so-called Trump trades after polling data cast doubt on that result. A Des Moines Register/Mediacom Iowa poll showed Harris with a 3 percentage-point lead in the state over Trump, and could be a bellwether for how Harris performs in nearby Wisconsin — one of seven swing states
The manufacturing economy struggled in October, according to the ISM Manufacturing Survey. “U.S. manufacturing activity contracted again in October, and at a faster rate compared to last month. Demand continues to be weak, output declined, and inputs stayed accommodative. Demand slowing was reflected by the (1) New Orders Index remaining in contraction territory, (2) New Export Orders Index contracting moderately, (3) Backlog of Orders Index dropping further into strong contraction territory, and (4) Customers’ Inventories Index indicating customers’ inventories were ‘too low.’
While the average day of the past few weeks has involved election odds pushing yields higher, today was quite the opposite. There’s some debate as to whether it was polling or betting market odds that got the markets attention, but less debate about the nature of the ifs and thens at a broad level. A modicum of lower certainty of a Trump victory was the catalyst. It was a spark that didn’t need to burn for long in this environment characterized by excessive dry powder for volatility. Bonds thought better of the overnight rally by mid-day, but not enough to undo the gains. Ultimately, yields ended right about where they were before Friday’s jobs report. Exciting stuff for today, but boring in the bigger picture.
UMBS closed the day up 31 much-needed bps, at 99.17