"The economy does not land" and "Trump trades" dominate the U.S. market

Market style reborn! "Trump Trade" returns, "no economic landing" priced in.

As the US election approaches, traders are gradually pricing in election risks, and signs show that Harris, who was previously strong, has been overtaken by Trump. The "Trump Trade" is regaining momentum, boosting risk assets.

At the same time, the overnight release of September retail sales data in the US exceeded expectations, showing strong economic momentum, increasing the possibility of "no landing," denting rate cut expectations, and putting pressure on the US bond market.

Surge in retail data, will the US economy ultimately avoid a "landing"?

Data released overnight showed that US retail sales in September rose by 0.4% month-on-month, higher than the expected 0.3% and the previous 0.1%; the year-on-year growth rate fell to 1.7%, the lowest level since January.

Some views point out that this retail data follows the previously strong CPI data and non-farm payroll reports, further strengthening the view that the "economy is far from entering a recession."

However, it is worth noting that the US Census Bureau made the largest seasonal adjustment to this month's retail data in years. If seasonal factors are excluded, retail sales in September actually fell by 7.5% month-on-month.

The surge in September retail data increases the probability of the economy avoiding a "landing," and market expectations for a Fed rate cut are converging.

After the data was released, forward contracts showed that traders reduced their bets on rate cuts in November and December by about 42 basis points.

Reversal in the election situation, "Trump Trade" returns

In a recent research report released by Ping An Securities analysts Zhong Zhengsheng, Zhang Lu, and Fan Chengkai, from October 14th to 16th, Trump's advantage in key swing states expanded, and the expectation of his election suddenly increased.

Citigroup strategists Daniel Tobon and Dirk Willer wrote in a client report that the possibilities of tariffs/trade and fiscal expansion are two major concerns, both of which have an impact on inflation expectations. The bank also stated that the "Harris Trade" may be limited as she is unlikely to gain control of Congress Ping An Securities stated that the capital market is restarting the "Trump trade," mainly reflected in the positive performance of U.S. real estate and financial stocks, the continuous strengthening of the U.S. dollar, and some pressure on the RMB exchange rate. Market observers also expect energy stocks and cryptocurrencies to benefit once again.

According to Ping An Securities, the reasons that may be driving the expansion of Trump's advantage include:

As the situation in the Middle East escalates, voters' dissatisfaction or increase in support for the Democratic Party's support for Israel and increased military spending.

In the midst of hurricane impacts on swing states, the Trump team has intensively launched political attacks.

Harris's recent TV interviews have been criticized for lacking a stance on key issues such as immigration and the Middle East.

Due to worker strikes and rebounding wage growth, inflation concerns have resurfaced, and Trump is believed to be better able to control inflation.

Billionaire Stanley Druckenmiller stated in a media interview that in the past 12 days, the market seems to "strongly believe that Trump will win." The main signs are:

Bank stocks have risen, accumulating an 8.5% increase over the past two weeks.

The stock price of Trump's media technology company (DJT) has surged since the end of September, with a cumulative market value increase of nearly $2 billion.

Bitcoin has risen by about 13% in the past week.

The U.S. dollar recently rose to a two-and-a-half-month high.

Overnight Market Trends

The main U.S. stock indices were generally stable overnight, with the S&P hitting a new intraday high before turning lower, the Nasdaq approaching erasing a 0.9% gain, and small-cap stocks seeing their first decline in five days.

U.S. bond yields collectively rose, with the 30-year Treasury yield leading the gains.

The U.S. dollar index continued to rise, up for 12 out of the past 14 trading days.

Furthermore, the correlation between gold and the U.S. dollar sharply increased, with the gold price hitting a new historical high, approaching $2,700.

After breaking above $68,000, Bitcoin saw a slight decline.