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Terminal and the Bloomberg Business app. Any if you had any research rights in the data since the last meeting of the FMC suggests the fifty basis point cut that occurred was probably too much too soon. That raises the risk the price inflation might stop moderating and the stock prices might continue to melt up. Joined us now for more ed Welcome to the program sir. Let's start with the stock market. Are you calling this a melt up?
I think it has been a bit of a melt up. I mean, look, we're looking at valuation multiples that are getting right up there close to where we were right before the tech wreck in the late nineteen nineties, we saw a melt up that got the forward pe s and P five hundred up to twenty five. Now we're at twenty two, so it's starting to look like it ed.
We're seeing bond yields back up as well again this morning, by two basis points of four to twenty six. Can we sort of fold the election into this conversation as well? Do you think the election and the GOP suite potentially would open the way to a move back towards five percent on a ten year Unfortunately.
It is a conceivable scenario that the bond vigilantes are are definitely mounting up. I mean, the low bond yield last a few weeks ago was three point sixty five percent, and now we're at four point two six percent. I think over night we got the four point four point
eight four point two eight five percent. So yeah, I think there's a possibility here that if we get a sweep either the Democrats or the Republicans, the bond market will conclude that nothing will stop either party from spending a lot, maybe cutting taxes a lot for some folks, not for others, and all in all, continuing to widen
the deficit and the debt. Meanwhile, the interest payments continue to accumulate, and we'll probably hit a trillion dollars, which will make lots of headlines within the next few months.
And I have to say it's very compelling arguments. Me and I worry about the deficit, and I watch the bond auctions and I see the increasing size. And last week I was in Washington, d C. With all of these international central bankers, and these international bankers, and where do all of their clients want to put their money? Even with all these concerns, talking with the US election, the deficit, the United States, they still want to come here.
So what is going to make people say, no, Moss, we're done.
Well, that's a good point. I mean, the reality is that the dollars actually strengthened at the same time as the bond deal has gone up. So that's suggests that there are people that are concluding that if the Fed, if the bond vigilantis are getting the message out to the Fed that they don't want any more rate cuts, that they think it was premature. That strengthens the dollar,
which means that people are buying these bonds. So I wouldn't get too excited about the bond you'll going up to five percent, But it's certainly looking more realistic than it did a few weeks ago. And a few weeks ago we thought that the Fed that the cut prematurely, that the economy was going to surprise them to the upside, and that's exactly what's happened.
There's also been a contradiction here. People used to think that higher bond yields would XCISEE a pretty big tax on equity valuations. What we've seen is this melts up continuing despite the melt up in yields. Yes, what we have seen though, is a change with that rotation being challenged to small caps and it's the other four hundred and ninety three stocks. Do you think that that is what this is going to look like into year end?
Well?
I think if in fact, the market is starting to perceive that the Fed isn't going to ease as much as they thought after the fifty basis point cut on September eighteenth, then I think the market starts to get cool off to the idea that the Rustle two thousand is going to outperform and go back to the S and P five hundred and maybe even go back to just seven of those stocks, a so called Magnificent seven, and look to John's point, I don't want to get
too worried about a melt up here an evaluation basis. If it turns out to be an earnings lead melt up, we certainly have had Tesla for example. Maybe it wasn't so much earnings as hype, but as you folks point out, this is going to be a busy week for earnings, and we could have some upside surprises from the Magnificent seven which would drive the NASZAC to further record hize, even in the face of bond yields going up.
I want to get back to where you see bond yields going because you say that we could get higher yields regardless if it's a Republican or Democrats sweep. When you look at how the Senate races are looking to go, it looks like you can pretty much take the dem sweep off the table. If there's going to be a sweep, it's likely going to be read So tell us a little bit more what that could mean not just to yield short terms and long terms, but also other assets.
Well, it gets as confusing as Trump's policies are confusing. You know, the idea of raising tariffs across the board by twenty percent and against China sixty percent is probably a bargaining position. I mean, it's hard to imagine that this administration would get advice from its own economists saying that that would be a good idea because it certainly would be inflationary, so bargaining chip for the deal maker Trump would make sense, But as a realistic alternative to
taxes and incomes, that doesn't make that much sense. On the other hand, Trump wants to produce more oil, which would be disinflationary for the US, but there's no discussion by either candidate about doing anything to reduce the deficits, to deal with the debt, to deal with the exploding, exploding interest and that interest expense of the government. So I think the bond reaction to a sweep, as I said,
by either side. I want to be balanced about this, but you're right, the sweep is looking increasingly if it's going to happen, it would happen with Trump winning because of what you said about the Senate and the House, and in that scenario of the bond yield, I think easily goes to four and a half percent.
Take us through what can happen if this election drags on, or if it's contested.
I don't even want to think about that possibility. The country is so partisan that, you know, we've been kind of driving ourselves mad here with the political partisanship, and to have a closely contested election, we'd be very unsettling to the bond market, to the stock market, to all of us. I think it would be resolved of obviously at some point we will have a president, but if it takes months, it could mean that the rest of the year will not be a great one for the financial markets.
That is the market nightmare very few want to see. And thank you, sir if you HADENTNY research. Dollar strengthening heading into the final week of the US election has tried its way the economic impact of both candidates. Mark McCormick of TD writing, we have painted the election as a binary event, with massive tale rists on either side. The data currently favors the dollar regardless of who wins, suggesting to buy dollar dips into twenty twenty five, even
if Harris wins. Mark joined US now for more Mark, welcome to the program. Let's just look ahead to next week, give us the best case outcome for the stellar and give us the worst case outcome for the US stella which ones which.
Well, Like I said, it's a binary event with like two large tail rists on either side. So obviously the most bullish for the dollars of red wave, largely again because number one, you get tariffs immediately on day one, as soon as Trump takes over. The second thing is you can have fiscal support and deregulation and all the things that are great ingredients that are cocktails for outperformance
US equities. And I'd say on the other side, the thing that kind of confuses the market the most, or is probably the most bearish for the dollar, is a blue wave, but it's probably the most unlikely scenario. Betting markets have it about ten percent, largely again because what
you could do is you undermine the equity market. I think the most important thing to think about for this election is the number one thing that's been driving the currency market is not rates differentials, it's equity market performance.
With that in mind, then Mark, what do you think is actually outperforming already in pricing gain the election outcome? Because a lot of people in the equity market are look into financials and saying that maybe that's a lean to a Trump wain and maybe that's so for done and maybe we get reversal of that through next week. Do you see any sign if that taking place in fas with that in mind.
Well, I think one component. It's been really interesting. We talked about this a lot this entire year. There's really no macro theme that's driving markets. Like for the first start of the year, we talked about inflation, then we talked about growth. Now we're talking about inflation again, probably because we forgot to talk about inflation for a little while. So the number one factor that we see that is kind of underscoring what's driving market performance is mean reversion
expressed or positioning. So I would highlight that through the move that we saw recently in the dollar, the dollar was basically short on our positioning models, so we had a very like we had a perfect storm of US data outperforming the rest of the world, which has actually been happening through most of the summer, but the market's woken up to it. We've also seen again the FED took a huge risk by cutting fifty basis points and now we're starting to see that could backlash a little bit.
And also again the positioning was built into a single narrative which was only about the slowdown in Theo's economy, and now all these things have come back to mark they were positioned incorrectly. Data dependence leaves us again very focused on a month or six weeks of data that basically in turn catches markets offt guard when the pendulum SLINKs too far in the other direction. So I think a big piece of this right now is that the
dollar looks fundamentally positive. Data is doing better than what we're seeing in Europe and China. And I know markets are like very focused on the China Simules package, but to me, the China Simuls package is a second half of twenty twenty five story that things are going to get worse before they get better. So again the key theme here is that the macro situation is evolving into what is a more bullish fundamental story for the dollar, regardless of who wins.
Some people who are skeptical of the dollar point to gold, and they say gold's been a moonshop because people are worried about the dollar and worried about the idea of people having faith that this truly can be the reserve currency. Not necessarily next year, the year after, but say in
ten twenty years. Do you look at gold, given the fact that it's almost doubled in price since the beginning of over over the past five years, if you take a look at that, does that make you at all concerned about this dollar call?
It doesn't.
I think what's interesting is again you have to think about, like, what are the assets that people want to hold in an environment where there's geopolitical uncertainty we're dealing with, with my opinion, structurally higher inflation than what we saw before the pandemic, in a world where what are your bigger risks towards a recession or higher inflation? And I think in that environment, like more people are focused on hard assets, and those hard assets provide a decent hedge relative to
say fixed income. So I think if you were to think about what's my asset allocation mix, and still you want to belong yous equities, which gives you an exposure to bus dollar. If you think about even an asset allocation mix we talked about in our election piece for next year is yes, Asia has the ability to grow their economy. They have savings that they've exported to the rest of the world. Europe does not have the ability to grow to economies you've talked about this morning. I've
hurt in prior pieces. But like France is spending too much, Germany doesn't spend enough. And again, if you look at if you think about the dragging report, everything that's been coming out of Europe is focused on the industrial audio sector, which is something that there's a reason why there's terarifs being put in these sectors. And there's a reason why China is the world's largest export of automobiles right now.
So if you think about the growth and the equity and all these stories, the US equity market still offers probably the best risk adjusted performance relative.
To other classes.
We could see a rotation to Asian equities where currencies are undervalued, but that still leaves Europe somewhere far behind everywhere else. And gold is still an asset that you want to hold onto.
Because what we're.
Seeing is coordinated fiscal and monetary policy with inflation above.
Target mark, We've got to leave it there. I appreciate it. Stain just got some breaking news on blowing care. Matt McCormick, the of TD. We're just over a week until election deck Blimberg reporting more registered Republicans have already voted in Arizona, Nevada, and North Carolina. They're Democrats, Henrietta Trace of Vada. Palmer's writing, it is distinctly possible that a victor is named in
the twenty twenty four election by Wednesday. If not. The worst case scenario pandemic year level disruption suggests developments could come through Friday and possibly Saturday, as was the case in twenty twenty. Henrietta joins US now for more So, Henrietta, so let's get to your base case. Do we get at twenty sixteen or a twenty twenty.
I think we're looking more at twenty sixteen.
I think a lot of the disparities, discrepancies, any concerns at the local and county level amongst the electors.
You know, they're fully stabbed.
They have gone through the twenty twenty two midterm elections, They've gone through all these lawsuits. I think all the teaser crossed and the eyes are dotted, and we will have an outcome on Wednesday. I'm optimistic, Henrietta, But what do.
You make of Maricopa County election officials saying could take anywhere from ten to thirteen days.
Yeah, I mean, they're definitely preparing us for the worst.
But I believe Arizona and Nevada in particular were uniquely sort of embarrassed by the way the twenty twenty election took so long to call, and a lot of that disruption came from the occupant of the White House. So I think that this time around they will be very diligent and careful about how they're reporting, and then hopefully we won't have to depend on just one state to
decide or to know who wins the election. Maybe in the House for sure, I think it'll take all week to get a solution, but I'm hopeful that the rest of the country will give us a decisive solution.
A theme that I've been hearing from sources a lot on both sides that Democrats are actually running a very good ground game, especially in these swing states. But you're actually seeing, and so are we. A lot of Republicans are going out and voting early. Are they catching up to that ground game.
It's the ground game right now, and the pull forward vote is incredible in a number of states, including Nevada, there are double the amount of election day Republicans from twenty twenty voting early this cycle. So this message that you saw on the Big Joe Botron at MSG last night was vote early. The Republican Party across various swing states, including Pennsylvania and Georgia as well, have spent millions of dollars trying to educate their voters to vote early, vote
in person. Democrats still predominantly vote early in mail in ballots, So we're waiting for that data, for example, out of Clark County in Nevada, to catch up. But what we're going to need and what Democrats will need going forward, is to see what the turnout is on election day, and in particular this week, this is a week where a lot of the younger voters turnout early if they're going to vote. Mostly right now, it's rural, white, older voters who are turning.
Out, which is a disproportionately Republican demographic, Henrietta, we know that once you go out and vote early, then whether Kamala Harris or Donald Trump, you could focus on some of those margins potentially to get out then on election Day, and you say this all comes down to the suburbs.
Who wins the suburbs, Yeah, that is the game.
In twenty sixteen, Hillary Clinton lost the suburbs, and I think it was only by about two points, but it was enough to lose the entire election. This is your suburbs outside of Philadelphia, outside of Pittsburgh, key portions of Michigan and Wisconsin. In twenty twenty, Joe Biden narrowly won them back again by I think two points, so he was able to claw back those suburban voters. Kamala Harris
currently leads nationally with suburban voters by six points. So we spend a lot of time talking about the youth Latino and youth mail vote. Obviously they'll be a part of the conversation as we're talking about Puerto Rico being a floating pile of garbage and things like that. But that is what turns off the suburban married voter, and they disproportionately vote in elections, and they have been the clincher for either candidate in the last two cycles and
probably will be again in this third cycle. They're voting more than they did in twenty twenty, while cities and urban dwellers are voting less and Royal voters are voting.
More than they did in twenty twenty.
So it's the suburban vote that is integral and critical.
To this election right now.
So you push that forward, Henriette. Are you saying that Kamala Harris is more support than the polls are giving her?
Harris has more support with voters who matter more again, because they vote more. They are a larger demographic, and they are the ones that are persuadable more than anything else. You know, you've lost the cities that those voters are going to Democrats, and you've lost the rols those voters
are going far to Donald Trump. It's the voters in the middle in suburbia that are swinging back and forth between twenty sixteen being pro Trump and then twenty twenty decided they didn't like what they had gotten for the last four years, and now under Kamala Harris running at the top of the ticket, they have swung pretty substantially in her direction and away from Donald Trump. And their turnout is what's going to be the biggest bang for your back population wise, to split these states.
It's pretty controversial, Henrietta. What you're saying, based in the polling that we've seen in just sort of the momentum and what we've seen embedding markets which have given Donald Trump the clear lead. Where are people wrong in their analysis? Is it just a suburban voter or is there something else in terms of what the deciding factors really are.
Well, I spent all.
Week last week with investors up in New York, and I would say that the street is even more bullish on Trump winning than the predictive markets are. Last I check pridtive markets, where like sixty one percent that Trump would win, I'd say on the street it's more.
Like seventy percent.
So there is this high degree of conviction, and the early voting data out of Nevada is painting a very leak picture for Democrats.
So there's reason to be excited.
Unfortunately, it's just too early to get fully on board the Trump train and put your bets on the market right now in a way that suggests that there is no time for change. There is a whole another week of early voting in most states, and then obviously we have election Day where turnout is going to be the name of the game. So I think that the street is picking up accurately on state of Nevada.
But that's not the story that the rest of the nation is telling us. Yeah, it could be, but it's pretty early.
Henry. So we spoke to against this morning that said, for the business world, for the tech titans, the writing might be on the wall. Let's talk about some of the tech titans. After the assessmin attempt on Donald Trump back in the summer, we had an interview. We spoke to the Meta CEO, Mark Zuckerberg, who referred to that
as being badass. And then we saw Jeff Bezos's Washington Post over the weekend failed to endorse a candidate, some people suggesting that maybe it's because Bezos was worried about an incoming Trump administration. And then we heard on the Rogan podcast, so the Alphabet ceo had given the former president at call as well to congratulate him on his campaign event A McDonald to what a hit it was
on Google. What do you think that they sense is coming from the Republican leadership that might affect them?
That's a great question. I mean, you're going to have anti trust on the docket next year. We have a massive tax bill that we have to write. The taras are also going to be a concern, not just that, but expert control restrictions, inbound and outbound investment restrictions. I
think all those pieces are really integral. But the reality is there's a five trillion dollar tax bill that we're going to be writing next year, and all these corporations, particularly any that are Ali national, have a lot of skin in the game on this one, So it makes sense to try to make sure you have bridges mended with everybody potentially that could win. I think there should be a lot of focus on the House members and the House races. Those are pretty predominantly in coastal states
this year, so New York and California. If I were those tech titans that I was trying to really influence the outcome of the election and focus on the House members just as much as.
The White House.
Im Retta, appreciate your views and your perspective the analysis there from Henrita Trace of Vader Partners. This is the Bloomberg Surveillance podcast, bringing you the best in markets, economics, angiot politics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business Amp.