Bassanese Bites: Harrislide? – November 04 2024
Global markets
Global equities fell back further last week largely reflecting mixed earnings reports some some of America’s Mag-7 tech stars. Nervousness ahead of this week’s US Presidential election likely also played a role.
Last week was big in terms of US tech earnings, with Microsoft, Apple and and Meta disappointing investors, while Amazon surprised on the upside. Overall, however, it’s becoming evident investors are demanding these companies deliver strong market-beating results – and optimistic outlooks – to sustain their now lofty valuations.
Last week’s US activity data was also mixed, thereby doing little to shift market expectations that the Fed would deliver a 0.25% rate cut this week.
- At 2.8%, annualised Q3 GDP growth was only a touch softer than the solid 3% rate expected.
- US job openings dropped modestly more than expected in September but remained at a high level.
- October employment growth was much weaker-than-expected (+12k versus +100k market expectation), but the unemployment rate held steady at 4.1% and markets dismissed the result as likely reflecting disruptions caused by Hurricanes and a major labour strike at Boeing.
Although a bit higher than in recent months, the 0.3% gain in the core consumption deflator was also no worse than market expectations – given it had been prepared by the higher-than-expected core CPI result earlier last month.
Global week ahead
Key highlights this week are the long-anticipated US presidential election and the Fed’s November policy meeting.
As regards the election, the betting (Polymarket) at at the time of writing still suggests Trump is a warm favourite with a 55% chance of winning, though this has narrowed from a 65% chance a few days earlier. The myriad of polls still suggest a close result.
Two key issues seems to be 1) which side gets the best polling day turnout 2) whether polling has been underestimating “shy Trump” or “shy Harris” supporters relatively more.
To my mind, I suspect Harris will ultimately prevail, and likely by a comfortable margin. Why? I’m dubious of the signal from betting markets due to the potential for manipulation from deep-pocketed Trump supporters. The Democrats also seem to have a better polling day “ground game” in getting out the vote, and there may well be relatively more “shy Democrat” voters this time around from amongst those that usually vote Republican (and Trump voters are perhaps less shy than they used to be!).
Either way, it promises to be a fascinating Wednesday afternoon Australia time. Should Trump win, expect a further likely lift in bond yields and the $US, and a potential negative equity market reaction – due to heightened concerns over inflation and trade wars under his Administration.
There’s less uncertainty with regard to the Fed, which seems virtually certain to cut rates by 0.25% Thursday morning (US time).
Australian market
The major local highlight last week was the Q3 CPI result which was OK, but not great. Headline prices rose a touch less than expected (+0.2% versus +0.3%). Though this was influenced by the sharp 17% drop in electricity prices due to government subsidies (which dragged down headline CPI prics by 0.4%) the annualised headline gain in prices excluding subsidies was still only 2.5%.
