Macro Dragon: WK # 40... End of 3Q, Supreme Court Nominations , 1st US Presidential Debates + Trumps Tax Returns

Macro 3 minutes to read

Kay Van-Petersen

Global Macro Strategist

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.


(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon: WK # 40... End of 3Q, Supreme Court Nominations , 1st US Presidential Debates + Trumps Tax Returns 

 

Top of Mind…

  • Happy Monday Folks & Welcome to WK # 40
  • Hope everyone had an awesome wkd full of half-marathons, couch lounging expert views & more kips than a clowder of cats
  • What kind of week are you trying to have up ahead?
  • Focus: Its heating up… at the very least that is what the newswires will have you believe, as the beat to the US elections is expected to ratchet up day-in & day-out to the Nov 3rd date.
  • Yet there are likely to be at least three main focus points this wkall very much tied to US politics. Tactically we continue to be in a vacuum, awaiting the next hit of fiscal and/or monetary stimulus. Strategically, make no mistake, there is no escape from this regime of leviathan liquidity, we will be here for years to come.
  • One: Trump has nominated conservative Judge Amy Coney Barrett to fill the supreme court seat of the late & legendary, Ruth Bader Ginsburg
  • Judge Barrett came up under the very conservative – & former close friend of the liberal Ginsburg – the late Justice Antonin Scalia.
  • This is a legacy trade for Trump, as it would cement a 2 to 1 advantage to conservative on the US Supreme Court – whose members typically serve for life & hence have a huge structural influence on the judicial influence in American society, culture & business.
  • The overall consensus view seems to be that the republican dominated Senate will rush this over in record time & will be able to garner the votes needed, with the democrats not being able to do much (for now).
  • From the Dragon’s standpoint, if she is successfully put forward (could we see Romney pulling a 180 on Trump, post being called a loser numerous time, as well as a ‘pompous ass’?), it will likely be a net cost to Trump from the voters who have been undecided until now.
  • Is it a smart strategy? Well it depends, if you are pretty sure you are not going to be elected – then its pretty smart, also don’t forget Trump’s age, i.e. statistically his theta is limited. Likewise, if your are pretty certain you are going to get a landslide victory & continue to hold the Senate, then its smart from a take no prisoners approach.
  • If its marginal in regards to election outcome, then it becomes a super questionable move.
  • Net-net, it’s a battle win that the republicans could claim for now, but it is far from winning the war - & yes, net-net the American tax payer is paying for this duopolistic structure. Its really not too different for paying 2 & 20 for a fund manager to have the privilege of underperforming on your assets. At least on the latter, the price you pay (& whom you pay) is a lot clearer.
  • Here is a potential sequence of steps needed to bring this home for Trump. Lastly worth noting she is from Florida, which will be one of the key swing states in the elections.
  • Two: We get the start of three presidential debates which should fall under the days of Tue 29 Sep, Thu 15 Oct & & Thu 22 Oct. First debate should be 2100 to 22:30 ET.
  • Again given how polarized both camps are, its likely less about changing one’s tribe, but about those who are left undecided for now (yep, yep don’t get KVP started on those folks).

  • Also there will be no live audience, which may work to Biden’s advantage – he will likely need it… remember Trump did the Apprentice for +6yrs.. he is a master puppeteer.

  • No doubt, some Dems would love that “I’ll be your huckleberry…” scene from Tombstone, where Biden gets switched for Harris, Bernie, anyone else?! That scene has to be one of the most gangster of all time, yet one needs to watch the whole movie – one again, context is everything. From the Dragon’s standpoint, its pure collateral damage control from Team Biden.

  • Here is a NYT breakdown of the debate calendar.

  • Three: Taxes or lack thereof, early Asia Mon Morning we are hearing that the NYT has a report showing that Trump has not paid taxes in 10 of 15 years.

  • LONG-CONCEALED RECORDS SHOW TRUMP’S CHRONIC LOSSES AND YEARS OF TAX AVOIDANCE

  • Again, likely less relevant to team blue & red as they are as tribal as one gets (i.e. nothing they likely would not have guessed, be it true or not), yet what’s the effect on the undecided voters?

  • Markets: Month & quarter end flows could make this a noisy wk. Given its end of 3Q ladies & gents, we really only realistically have 2.5 months of actual liquidity & action given seasonal year-end effects. I.e. For the traders, make the last few openings of the year count, take your time, be patient, there are always opportunities.

  • And yep, 4 consecutive down weeks in US equities as measured by the S&P 500, but note, the Nasdaq-100 (leader) had a big pop up of +1.96% to 11151, vs. SPX pulling back a further -0.63% to 3298.

  • Economics: Busy one this wk, with final PMIs across the board, as well as Super Friday in the US with NFP, AHE & U/R due – worth noting we got a slight uptick in jobless claims last wk (870K a 850k e 866K r ).

  • Something worth monitoring, as going back to Powell’s last FOMC press conference, he did raise concerns that with no follow through on the fiscal package side, we could start to see that data feed through in unemployment & consumer spending.

  • KVP likely feels we need a few more wks to see if we really are seeing a spike here in jobless claims, maybe even an entire month, as US Flash PMIs were in-line for Mfg. at 53.5e & Serv. missed a touch at 54.6a 54.7p, yet obviously lower that previous 55.0p. So again, potentially not as big an impact into the elections as could have otherwise been the case… yet lets see… bear in mind that some folks have already voted given the mail ballot system in some states.

  • We are also due US Mfg. ISM & final 2Q GDP, as well as PCE data.

  • Politics: Already touched on this, really all about US elections until Nov – this wk focus should be on the Supreme Court Nomination & of course, the 1st presidential debate between Biden & Trump. Will be interesting to see if the NYT Tax piece is just noise or potential signal this wk.

  • Central Banks: RBI 4.00 % e/p, PH 2.25 % e/p

  • ECB’s Lagarde set to speak on Mon 21:45 SGT & Wed 15:20 SGT

  • Fed Speak: There are at least 12 different interviews & speeches from FOMC members, including Clarida – yet excluding Powell (who was on quite a few times last wk, including testifying with Mnuchin before the House). It is worth noting – something flagged a number of times by our CIO Steen Jakobsen – that we are getting a huge range of mixed messages from the FOMC members.

  • How much of this is discourse to enhance their views or/and a strategy to put the focus & pressure on Congress? (i.e. we need more fiscal, not more monetary policy) remains debatable.

  • Clarida is set to speak on Tues 23:30 SGT.

  • Bottom line, when it comes to the US we are in vacuum where we can likely expect no fiscal & nor monetary boost to the US until we are either on the other side of the US elections, and/or we see a massive fall-out in the equity & bond markets that forces the Fed & Treasury’s hand.

  • Note this does not change the broader backdrop of a Leviathan Liquidity Regime that is unparalleled, but as in all things with huge structural trends, the mean-reversions make us re-question the broader thesis & its assumptions.

  • Holidays: China out on Monday & Friday on bank holidays. HK will be out on Thu & Fri.

-

Start-to-End = Gratitude + Integrity + Vision + Tenacity. Process > Outcome. Sizing > Idea.

This is the way 

KVP

Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning 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. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

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

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.

This advertisement has not been reviewed by the Monetary Authority of Singapore.