This is the second part of Macro D’s US Election Series, please read the first part here if you haven’t done so. Let’s now go straight into the interesting bits.
So, on one side, we have asset inflation (that is, the kind that makes the average consumer nervous when he goes shopping) that has now put the people of all hemispheres on alert, and they are starting to get fed up with it. On the other side, we have the attempt by central banks to tame this inflation. We do not want to disrespect the average consumer here. Still, the reality is that we, as macro traders, are necessarily interested in looking at the psychology of that consumer and then at his increasingly meagre budget. For us, it is essential to intuit/evaluate/capture when that average consumer will lose patience because it is precisely what is in the middle (the mass, the people who are the sum of all the consumers in this world) that contains the fuse that hides Pandora's Box. Let's look around with disenchantment.
And here we are, casting a glance towards the future. The futurist narrative now predicts another 3-4 rate cuts in the next year, until reaching 3% by 2025. These predictions make me break out in hives because I do not believe it is humanly possible, in a psycho-socio-geo-economic-political context like the current one, to make a prediction that the hallmarks of seriousness can indeed accompany. Too many clouds on the horizon, rough seas, and personalisms are coming from every hemisphere. I do not believe that this is "the time for predictions", this is "the time of the mirror of truth." No illusions. The clouds on the horizon are countless and have relatively long tongues. No one can see the winner's name hiding behind the sun that cautiously waits for the right moment to rise. Between Donald Trump and Kamala Harris, it will be (it already is) a head-to-head with no holds barred, which, as is natural, will have significant repercussions on economic policy. We expect some fiery days and a late October/early November with fireworks built in. Let's pay close attention to the financial calendar. On November 5th, we will know the name of the next occupant of the White House, and on November 7th, the Fed will decide on interest rates.
How will the outcome of the first appointment influence the second? How will the second appointment react after the one preceding it has already rolled his name? How will the markets receive the name and surname of the one who will carry the flag of the most potent state worldwide?
let’s unpack.
Keep reading with a 7-day free trial
Subscribe to Paper Alfa - Macro & More to keep reading this post and get 7 days of free access to the full post archives.