Morning Roundup

By Mark Masterson on November 7, 2024

Good morning,

Below are the news items moving markets today:

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Executive Summary

We are moving fast these days.  On the heels of a huge election – we now have the Fed meeting and Powell’s press conference post rate cut decision. 

Never a dull moment.

All expectations are for another 25 basis point cut.

We could look at a lot of things to determine a rate cut.  However, none is more accurate than the 2 year Treasury note yield. 

Historically, the Fed funds (in black) has followed the 2 year Treasury yield (in green) very closely.  When the green line heads south/down, the black line follows.

Well,  this morning the 2-year T-Note yield is still more than a half point below the Fed Funds target rate. 

So the FOMC has room to cut a half point if they want to.  More likely, just a .25 cut with a promise of another cut to come later this year. 

McClellan Financial 11 7 24

Here is the latest on the shakeup in Washington……

• Trump begins planning his second term, House control still to be determined:
• Donald Trump expected to close out the election with 312 electoral votes. Only Arizona and Nevada yet to be officially called, though both counts favoring Trump.
• VP Harris conceded the election yesterday (Axios);
• Biden to address the nation today at 11am ET.
•  Lot of press speculation on Trump’s likely cabinet picks, with hedge fund manager Scott Bessent in the running for Treasury Secretary, though John Paulson has also been suggested (FT, Washington Post).
• Healthy incoming GOP Senate majority seen smoothing approval of Trump’s top-level appointments. Big unknown remains House control, with 40 of 435 races yet to be called. Republicans currently hold a narrow House majority are increasingly seen likely to hold a slim edge going forward, though remaining races (many in CA and NY) may not be called for some time (Politico, Bloomberg, Washington Post).
• GOP sweep likely an asset to Trump in thorny legislative issues ahead, including possible renewal of 2017 tax cuts

Election:

• Trump won the “economy is everything” election as voters expressed anger over prices (link); Trump redraws US political map (FT)
• Trump team launches into transition mode advisers begin process of vetting candidates (link, Politico, Washington Post)
  • Treasury Secretary:
    • Scott Bessent, John Paulson, Howard Lutnick
  • Secretary of State:
    • Marco Rubio, Richard Grenell
  • Attorney General:
    • Mike Lee, Eric Schmitt, John Ratcliffe, Andrew Bailey, Kris Kobach
  • Secretary of Defense:
    • Tom Cotton, Mike Pompeo
  • Chief of Staff:
    • Susan Wiles
• Tax and spending cuts, border wall funding, regulatory rollback among priorities of incoming GOP Congress (Reuters)
• Trump wants to put familiar faces on his national security team after being burned during his first term (Axios, FT)
• Sources say DoJ assessing how to wind down Jack Smith’s two criminal cases against Trump post election win (Reuters)
• Harris camp misread an electorate that was more wound up about inflation and immigration than about Trump’s character (link)

Onward!

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Articles of Interest:

• Central banks:
  • Fed Chair Powell likely to be quizzed about impact of Trump’s policies on rate path (link, Bloomberg)
  • Trump’s victory and prospect of tariffs could upend global rate cut expectations (Bloomberg)
• Markets:
  • Trump’s victory turbocharges America First trades in echoes of 2016 (link , Bloomberg, Reuters)
  • Bond investors cautious on Trump win, saying euphoria could be short-lived if his policies drive up inflation (FT)
  • US dollar bulls embolden by Trump victory as they brace for tariffs (Reuters)
  • Collapse in volatility forces systematic funds to pile back into stocks, creating feedback loop (Bloomberg)
  • Japan’s forex diplomat ups warnings against weak yen (FT, Reuters); Trump win heightens risks for BOJ (Reuters )
  • PBOC sets yuan midpoint at weakest level since late 2023 (Bloomberg)
  • Chinese regulators tell banks to cut interbank deposit rates to free up funds to boost the economy, sources say (Bloomberg)
• Economy:
  • Trump’s election win puts China in tariff crosshairs, but Xi has options (link , Bloomberg, Reuters)
  • Asian economies brace for Trump tariff fallout (FT, Nikkei)
  • Trump-driven dollar rally could be beneficial for European exporters (Bloomberg)
• Corporate:
  • Trump’s win and likelihood of deregulatory drive to encourage firms to list as soon as 2025 (Bloomberg, FT)
  • Musk’s backing of Trump gives him extraordinary influence to help his companies secure favorable government treatment (Reuters)
  • Big Tech CEOs applaud Trump win, hope for more permissive attitude on deals, antitrust and AI in next administration (Axios, FT)
  • Silicon Valley poised to benefit from AI regulatory rollback, lighter touch on M&A oversight (Bloomberg)
  • Trump win casts doubts for US financials who may pull back from China, hive off local units or pause expansion plans (Reuters)
• Geopolitics:
  • Trump’s foreign-policy advisers have put forth different versions of a Ukraine plan to effectively freeze the front line (link)
  • Trump administration poses uncertainty over CHIPS Act; casts cloud over TSMC, Samsung Electronics chip plans (Nikkei, Reuters)
  • Israeli PM Netanyahu bets war strategy on new defense minister Katz as he prepares for Trump return (FT)

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Charts of the day:

How about the below charts showing Bitcoin returns.

The volatility is massive – but the volatility has been in both directions.

Given the Trump victory – crypto and Bitcoin will certainly be discussed more and the regulators may be a bit more open to crypto.

Bitcoin returns since 2010…

Charlie Bilello 11 7 24

Bitcoin crossed above $74,000 and $75,000 for the first time.

Charlie Bilello 11 7 24

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Quote of the day:

“Trade money for time, not time for money. You’re going to run out of time first.”

— Naval Ravikant