It’s going to be a big week. Plenty of news, and expect plenty of volatility. The focus will be in the US. The US general election is on 5th November. The Polls are tight; expect them to remain so until we get the result. However, it is best not to be complacent. If Kamala edges out in front of Trump, expect some left-field antics that ultimately may see the outcome being decided by the Supreme Court. On the heels of relatively positive earnings from US companies last week, this week, we get a read on how Microsoft, Alphabet, Meta, and Amazon are going. Mixed results are expected. Then, finally, Non-Farm payrolls get dropped on Friday evening. Expectations are for a gain of +180,000. Any number above this potentially puts any interest rate reductions for the year in doubt. The gains in employment have been consistently building for the last four reads. So, expecting the same. In Australia, the ABS issues monthly inflation data. The RBA will closely monitor the all-important Trimmed Mean YoY and MoM. Traders have been hoping for relief on interest rates since the global easing cycle commenced in May. The RBA interest rate of 4.35% has not changed since November 2023, and if inflation continues to soften, which is expected, then hopefully, we will get some relief and a Christmas rate cut. 

But first, let’s look deeper into how the US General Election is going and what the polls think. Polls leading up to the 2024 US general election suggest a highly competitive race between the incumbent Vice President Kamala Harris and former President Donald Trump. While early polling showed Harris a narrow lead, recent surveys have indicated that Trump has been closing the gap, making the race too close to call. Both candidates have experienced fluctuating support due to evolving voter priorities, particularly economic policy, foreign affairs, and social issues.

Swing states, such as Pennsylvania, Wisconsin, Arizona, and Georgia, are once again proving to be critical battlegrounds. Polls in these states reveal razor-thin margins, reflecting the divided political climate. Nationally, polling data shows Harris with a slight edge of 1-2 percentage points, but this margin is well within the error range, making it uncertain who will secure the Electoral College majority.

How do we feel the equity markets will react to each President? 

If Harris Wins:

Technology and Renewable Energy Sectors: Harris has emphasized boosting clean energy initiatives and increasing funding for technology infrastructure, including artificial intelligence and semiconductor production. If she wins, stocks in renewable energy, electric vehicles (EVs), and tech infrastructure could see a boost due to increased federal funding and tax incentives.

Healthcare and Pharmaceuticals: With Harris likely to expand the Affordable Care Act, healthcare stocks could experience mixed reactions. While healthcare providers might benefit from expanded coverage, pharmaceutical companies could face tighter regulations and potential price controls on prescription drugs.

Defense and Traditional Energy: Harris’s preference for diplomatic foreign policy solutions and increased scrutiny on fossil fuel production could lead to lower defense spending growth and more stringent regulations on oil and gas exploration, which might create headwinds for these sectors.

If Trump Wins:

Financials and Industrials: Trump’s pro-business agenda, focusing on tax cuts and deregulation, is expected to be favourable for financial and industrial stocks. Banks, in particular, could benefit from deregulation and lower corporate taxes, boosting profitability.

Oil and Gas Industry: Trump’s platform supports expanding domestic energy production, which could be a boon for the oil and gas sector. Energy stocks could see a rally on expectations of more favourable regulatory conditions and potential subsidies for fossil fuel production.

Defence and Infrastructure: With a stronger stance on national security, defence contractors could see increased government contracts. Trump has also emphasised infrastructure spending, which could benefit construction, materials, and industrial equipment stocks.

As we go to the polls on 5th November, expect more volatility, especially if the margins become tight.  If this is the case, expect the Trump playbook to include a strategy that sees the ultimate decision going to the Supreme Court. Trump controls the Supreme Court, and the outcome can only see him back in power and; with this, expect some volatility in the economy.

The FED is managing the economy well. Traders are looking towards this week's Non-Farm Payrolls. The upcoming release for October is highly anticipated, as it provides critical insights into the labor market’s strength and the broader economy’s trajectory. Scheduled for release on Friday, the report will be a key data point influencing the Federal Reserve’s monetary policy decisions and broader market sentiment. Given the recent volatility in financial markets and economic uncertainties, the NFP results could have a significant impact on stock prices, bond yields, and the U.S. dollar. The forecasting for the October NFP report will show a moderate increase in payrolls, with estimates ranging from 150,000 to 200,000 new jobs. This would be a slowdown compared to September's surprising addition of 254,000 jobs, which was the highest in six months. But if it falls in line with expectations, it has still to be regarded as positive. 

Also, its a big week for earnings in the US. Microsoft (Tues), Alphabet (Tues), Meta (Wed), and Amazon (Thur) earnings will be closely scrutinized for their performance in AI integration, cloud services, and advertising. While AI remains a major growth driver, how each company manages macroeconomic challenges, cost controls, and competitive pressures will be critical to its outlook. Investors will also be keenly interested in any guidance provided for Q4 and into 2025, especially as global economic uncertainties persist. Expect market volatility, as any surprises—positive or negative—could lead to significant stock price movements. Of the four, we expect generally good results; however, with Alphabet, we expect results not to be as strong as the others. On revenue, we expected it to grow modestly year-over-year, driven by Google Cloud and see a recovery in ad spending.

Concerning earnings, looking for an adjusted EPS and hoping to see a slight improvement, reflecting better ad pricing and cost control.

Apart from the above, it will be a very busy week in the United States, as investors also have to focus on the advance estimate of Q3 GDP growth, the unemployment rate, and JOLTS job openings. Other important data releases will include the ISM Manufacturing PMI, CB consumer confidence, the PCE inflation report, and personal spending and income figures. Across the Atlantic, the Euro Area, Germany, France, Italy, and Spain will release inflation and GDP growth data, while Germany’s GfK consumer sentiment, unemployment rate, and retail sales will also be closely watched. In Asia, China will publish its manufacturing and services PMIs, and Japan’s central bank will announce its interest rate decision alongside updates on the country's unemployment rate and consumer confidence. Australia will hopefully delver good inflation data. 

On the position front, we took a … on leveraged equity positions. Still not convinced that this … with last albeit riding it via physical holdings.  Oil continues to be volatile. The drop of …% after Isreal bombed Iran doesn’t seem right. We are monitoring the positions. We are happy to remain … but getting nervous. We went … both Gold (US… and Silver (…) and happy to hold. Both positions are deep in the money but we do have trailing … in the market as sentiment could turn at any time.  Wheat has come back after showing good profits but we are still happy to … for a longer term. 

Trade Focus:

Trade AUD/USD

Fundamentals:

The recent inflation rate rose to …% yoy in Q2 of 2024 from a nine-quarters low of …% in Q1, aligning with market consensus. It was the first … in annual CPI figures since Q4 of 2022, amid higher inflation for both goods (…% vs …% in Q1) and services (…% vs …%).

We expect the inflation rate QoQ to be to be softer than the last read at …%. Likewise we see the YoY read coming off …

Technical Analysis:

The AUD is trading at the … end of the range, it is oversold and if we get a move through … suggest a low is in place. Rather than buying the dip a break to the top suggests a turnaround. So would buy on the … 

Support              …

Resistance         …

Momentum        …