US Elections – The Final Countdown
US Presidential elections will take place on November 5, with about 1/3 of voters having already voted early or by mail. Senate and House results, along with the President, will set the Balance of Power; Senate results (likely to go red) should be clear immediately, the House within a week. Swing States (Arizona, Georgia, Nevada, Michigan, Pennsylvania, Wisconsin, and North Carolina) will be decisive. Results start in the evening, with a winner expected by midday Wednesday if races aren’t too close. Georgia and North Carolina should report first (after 7:30 and 8 pm ET), offering strong insights, while Pennsylvania and Arizona, very close and slow to count, could delay a winner call. Prediction markets like Polymarket.com will provide real-time odds as data emerge. Close races, recounts and slow counts may delay a final call by weeks, but all states must certify by December 11.
US Economics – Fed on track
Labour market data on Friday was weaker than expected, as NFP rose by only +12k against expectations of a+100k rise. Boeing strikes reduced jobs by ca. 44k, while the weather impact from hurricanes was more difficult to quantify. Absent government hiring of +40k, private payrolls fell by -28k. The unemployment rose from 4.05% to 4.14%, just shy of rounding up to 4.2%. Combined with lower JOLTS job openings last week, a falling quits rate and the employment cost index at 0.8% for Q3 (against expectations of 0.9%), the Fed will be on track to lower rates this Thursday by 25bp. The December cut is likely also locked in, but the outlook beyond will depend on the outcome of the US elections.
UK – Spooky Budget
The Labour government announced their budget a day before Halloween, and spooked markets as Gilt yields rose up to 40 basis points on the week. The OBR estimated the impact to be inflationary, but to only improve in the first years of the five year plan. While tax raises are funding part of the spending, borrowing was higher than anticipated. The largest reaction was in the front-end of the UK yield curve, as investors repriced expectations for BoE cuts. This week, the BoE will likely go ahead with a much-anticipated rate cut of 25 basis points on Thursday, but there is a risk that the BoE skips following the stimulatory budget.
Algebris Investments’ Global Credit Team
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