Macro Digest: US election - T minus 8 days

Macro
Steen Jakobsen

Chief Economist & CIO

Summary:  We see a closer than expected race for the US presidential election which take place next week. Here we provide our long-term analysis, together with the recent headlines.


Our long term analysis: Close to zero impact next four years from who becomes President. Both Biden and Trump have zero willingness or ability to “heal” the US. The 2022 midterm election is already key. The Democratic young-and-left rising fast as voice, while MAGA movement remains in some form after a Trump loss. Either way, it all adds up to more social unrest. I see Biden as a Carter-like President. Full of good intentions after the disaster of President Nixon’s Watergate and the first oil crisis. But external factors (US losing 5G – AI race) will leave US in open discussion on finding its true values and roots.

Headlines Monday October 26th

  • Clean-sweep odds have slipped to 50-50 now.
  • High level of mail votes could see Trump lead on the night, then lose as mail votes comes in – biggest risk if he moves the declare fraudulence.
  • “US Stimulus deal” remains elusive – seems it’s all part of partisan politics at election time – neither side wants to give the other side a win, but has to be seen as trying to act.
  • SAP results indicate “earnings recession” in big Europe…
  • 8 days to election night – this is going to be massive week in politics, more than in economics…
  • Big week for major tech.
  • US voters are angry, v. angry (link).
  • The seven political state of Wisconsin (link).
  • Ms Clinton sees clear victory – hmm she has not won a single election except the US Senate seat in New York given to her… (link).
  • China Communist Party plenum kick off in Beijing. This is the event this week. China impulse on credit + growth is 30-40% (right now China only G-10 with tight monetary conditions). Look for: shift from low-cost manufacturing to semiconductors, renewable energy, medicine and space. The key though is the de facto inclusion of President Xi’s: Dual-circulation strategy which is really short for – We don’t want to be dependent on anybody but ourselves.

Trading

We are going into the election with this portfolio (not advisory – only a model-based allocation)

  • Equity: 35%
  • Fixed Income: 27%
  • Commodity 10%
  • Inflation 10%
  • Volatility 3%
  • Gold 10 %
  • Crypto 5%

We believe in hedging overall risk. We are long risk through equities, hedged with volatility, inflation and commodities. We have added crypto as per below.

Source: Bloomberg and Saxo Group.

The real digital revolution... A true hedge on any new US President?  We think so...

  • Buy BITCOIN_XBTE @ 527.00
  • Stop @ 390.00

This is portfolio allocation of 5% into long-term 100Y portfolio

BITCOIN_XBTE:xome price chart. Source: Saxo Group
  • Millennials hold higher share of crypto than average portfolios
  • Future “solutions” on tax, capital controls, less monopoly is based on digital solutions
  • Increased anti-establishment is rising now most prolific with Youth divided.
  • We think the biggest “social deficit” is that of the Youth. Denied access to credit(housing) will lead to disintermediation from non-traditional sources.

We recommend 5% exposure to crypto through ETN is our base 100Y portfolio supported by recent break out to upside in pricing.

Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide and Product Disclosure Statement to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.
Please click here to view our full disclaimer.