Week Ahead: Trump Trade or Harris Trade? Major Week Ahead for Markets

 

Week Ahead, 4 Nov 2024

Macro News:

- The US FOMC meeting is anticipated to result in a 25bps rate cut.

- Funds shorting SGD, betting on slower global trade if Donald Trump wins the US Presidential Election. Thus, weaker global currencies and a stronger dollar.

- China’s manufacturing PMI re-entered expansion territory in October.

- Companies are ramping up efforts for Double 11 sales.

- Nil trade set up for the week ahead.

Medium Term:

- S&P 500 is expected to move downward in the short term, with the first support level around the 5,600 zone. If the S&P 500 breaks above the 5,800 mark, the downward trend would be invalidated. The FFI has declined, and a sign of weakness was observed on 31/10/24.

- STI is likely to trend lower, with initial support at the 3,480 level. Only if the index trades above the 3,650 level will the downward trend be considered invalid.

- HSI remains at its first support level of 20,600, aligning with the 38.2% Fibonacci retracement.

Long Term:

- S&P 500 remains upward

- Hang Seng Index (HSI) remains upward

- Straits Times Index (STI) neutral to upward trend.

Headlines Next Week:

- US Corp Earnings (PLTR, RACE, QCOM and GILD)

- SG Corp Earnings (CICT, Capland Invest, DBS, UOB, OCBC, SIA, SATS)

- US Presidential Election, US FOMC Meeting, ISM Services PMI

- China National People's Congress, Caixin PMI

- SG Oct PMI

About Trump Trade:

The "Trump Trade" refers to market movements and investor behaviors influenced by the economic policies and political actions associated with a Donald Trump presidency. This term gained prominence after his 2016 election, when markets reacted to his promises of deregulation, tax cuts, and increased infrastructure spending.

Key aspects of the "Trump Trade" include:

• Equities: U.S. stocks, particularly in technology, financials, industrials, and energy sectors, experienced significant gains. The Tax Cuts and Jobs Act of 2017, which reduced corporate tax rates, benefited tech companies with large overseas cash reserves, leading to increased investments, stock buybacks, and dividends. 

• Fixed Income: Expectations of increased government spending and higher growth prospects led to a rise in Treasury yields. The yield on the 10-year U.S. Treasury rose by 138 basis points, from 1.85% in November 2016 to 3.25% in November 2018. By the end of 2018, yields began to drop as markets feared the risk of a recession due to tight monetary policies.

In anticipation of a potential Trump victory in the upcoming U.S. election, markets are evaluating the implications of his policies, which may include deregulation, tax cuts, and increased fiscal spending. Investors are considering strategies such as increasing exposure to domestic equities, favoring shorter-duration bonds, implementing hedging strategies against a strong dollar, and diversifying into safe-haven assets.

Trump Trade Source: Saxobank

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