Macro Dragon: Trump, RBA, Powell, Lagarde... & count-down to Wed's VP Debate
Summary: Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.
Macro Dragon: Trump, RBA, Powell, Lagarde... + Wed's VP Debate
Top of Mind…
- Touched on this wk in the Dragon’s New Month = New & Final Quarter = New POTUS piece
- Worth noting that the key Final Service PMIs yest generally came in stronger than expected with final EZ in at 48.0a 47.6e/p (yet obviously in contraction territory being sub 50), UK 56.1a 55.1e, US 54.6a/e & US ISM Serv. PMI 57.8a 56.3e 56.9p (again US data still holding up!)
- Today we got a few key things including RBA rate decision, as well as ECB’s Lagarde (@ 16:35 & @ 21:00 SGT) & Fed’s Powell (@ 22:40 SGT) set to speak at different events
- Tomorrow will be all about the VP debate – naturally viewed as that much more pivotal, with Trumps’ health status likely to be in a state of Limbo until at least 2H of Oct
- In regards to Trump’s tweet last Fri on having contracted Covid-19 – biggest likely change from the Dragon’s view is that the probability of fiscal deal prior to the election has gone up
- By no means a done deal or even significantly above 50%, yet aesthetics of POTUS catching the virus are likely Net-Negative from the republican camp… its not going to be a Bojo sympathy theme. This could force the Republicans to be more open to getting to an agreement with the Democrats. Obviously one can argue if it really makes any difference, with votes already coming in… yet hard to see when US politics has been rational over the last few years
- Its worth noting with Trump that we are likely not going to know just how bad a state he will be in, until midway this wk to end of the wk. If you recall Bojo was first at home, ordering curries & dropping jokes… then needed to be rushed to hospital.
- Whilst the dominant press coverage on Trump is rarely net positive, its does seem pretty clear that the updates from the Doctors have been with a positive spin & a lot of questions are being dodged. It’s also worth noting Trump seems to be on steroids – which traditionally are only given to folks who are really in bad shape around covid – as well as a number of other prototype cocktail of drugs.
- He is back in the White House, yet still under full care - & whilst his car drive publicity stunt has been criticized , clearly he was still well enough to do that. Again real MtM on his health is likely to be seen before mid Oct.
- CNN Cut: Trump returns to White House and removes mask despite having Covid
- Fox Cut: Trump discharged from Walter Reed, returns to White House
- From what KVP can gather, the cleanest pathway in the scenario of Trump falling to Covid-19 or in someway being incapacitated is that Pence becomes the de facto face of the Republican Ballot. And it almost surely raises the delta of the Dragon’s contrarian (yet changing consensus view post the debate last wk), view that this is going to be a blue tsunami
- Either way – one thing that few people seem to be keeping in mind, is that no one is talking about upside risk. And on election night – despite ballots that will still need to be counted (our understanding is they have to wait for election night to open the mailed votes) – we may have a scenario where it mathematically impossible for one candidate to catch up to another, due to the loss of a number of the key swing states
- So pay special attention again to the likes of Florida, Wisconsin, Pennsylvania & Minnesota
- As always anything is possible… yet current feel is that most folks are on the side-lines, with a potential net-short bias on equities & folks worried about election uncertainty
- That could change very quickly if we have a highly probable clear winner on/very close to election day – i.e. short-squeeze, to relief rally given uncertainty & big event-risk being cleared, as well as anticipation of a new administration getting the next fiscal bill in order
Not Caught Enough of KVP?…
- From c. 52min in KVP talking on DollarYen on Bloomberg’s Daybreak This will resonate with the 4Q20 piece, where a high conviction structural trade view from KVP’s camp is being short DollarYen, seeing 85 – 95 range by back-end of 2021 & potentially 100 to high 90s by end of 2020. Naturally this gels with the multi-year dollar bearish regime view
- Have already flagged this great podcast, Insert: Human before from a friend, mentor, great soul & clear independent brilliant thinker Chris Colbert – do please check it out, if it makes you think, please follow plus leave a 5-star review. Feel free to drop Chris a line
Dragon's Must Reads…
John Hardy dropping a roadmap US Election Primer: The Final Sprint to November 3rd
We sort through important dates in this final sprint phase of the absurdly long US presidential election cycle. Historically, we have seen significant shifts in the polling in the final weeks leading up to the election. As well, we consider factors that can change the odds between now and Election Day on November 3rd.
Saxo’s US Election Cheat Sheet Which cuts into the three potential pathways into the elections, probabilities around them, as well as short & long-term positions across equities, bonds, commodities & currencies.
Start-to-End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Idea
This is the wayKVP
Quarterly Outlook Q1 2022
Quarterly Outlook Q1 2022: Fuelling the Energy Crisis
- The green transformation is fuelling the energy crisis. Is it time to base our energy future on reality not fantasy?
Energy crisis could turn energy stocks into secular winnerWith long-term expected returns for the global energy sector close to 10%, we look at 40 stocks that could be set to cash in.
Commodities supported by greenflation and tight supplyThe commodity sector recorded its best year since 2000 in 2021. Will the good times will keep rolling in 2022? Ole Hansen thinks so.
The bond bear market will not spare anyoneInvestors will need to prepare for the pain of a bond bear market in 2022. But are there opportunities out there, too?
Mean reversion for big 2021 moves and lots of volatilityDon't expect the Japanese yen or Chinese renminbi to stay at their overstretched valuations for long. Get the FX Outlook now.
The future in energy-intensive proof-of-work looks dimIn the midst of a global energy crisis, electricity-guzzling Bitcoin and Ethereum are set to feel the heat from politicians and investors.
Australian equities poised to benefit from the energy crisisThere may be an energy crisis, but that's fuelling a charge in the ASX. FInd out which stocks could be burning hot this quarter.
The EU’s unwise energy policyThe EU's energy crisis is one of the main drivers of inflation. Is there any relief around the corner, or is the situation critical?