Connect with us

Economics

Rabo: As Trump Challenges The Results, This Is Likely To Get Bumpy For Markets

Rabo: As Trump Challenges The Results, This Is Likely To Get Bumpy For Markets

Tyler Durden

Fri, 11/06/2020 – 08:45

By Michael Every of Rabobank
What a nice end to the week. Front and center, obviously, is the ongoing chaos of the US election. The latest developments are that vote margins remain razor-thin in several states, with Trump’s lead declining in Pennsylvania and Georgia, but Biden’s lead narrowing in Arizona in tandem – potentially enough that the state could, perhaps, flip back to Trump when/if all votes are finally counted, if the current vote split being seen continues. Were that to occur, the narrative, and the market, could move quickly. Recounts seem likely, however.
More importantly, Trump himself was front and center, with unprecedented claims that the election is being stolen due to orchestrated Democrat voter fraud: with litigation pending, this suggests the election will end up with judicial action one way or the other. Mainstream and social…

Published

on

This article was originally published by Zero Hedge
Rabo: As Trump Challenges The Results, This Is Likely To Get Bumpy For Markets

Tyler Durden

Fri, 11/06/2020 – 08:45

By Michael Every of Rabobank

What a nice end to the week. Front and center, obviously, is the ongoing chaos of the US election. The latest developments are that vote margins remain razor-thin in several states, with Trump’s lead declining in Pennsylvania and Georgia, but Biden’s lead narrowing in Arizona in tandem – potentially enough that the state could, perhaps, flip back to Trump when/if all votes are finally counted, if the current vote split being seen continues. Were that to occur, the narrative, and the market, could move quickly. Recounts seem likely, however.

More importantly, Trump himself was front and center, with unprecedented claims that the election is being stolen due to orchestrated Democrat voter fraud: with litigation pending, this suggests the election will end up with judicial action one way or the other. Mainstream and social media, and Bloomberg, report these claims –an unhappy echo of the infamous 1960 Nixon–Kennedy election– as “baseless” and “falsehoods”. That may well prove to be the case, but collecting evidence for litigation in such opaque matters takes time; until then, while the president’s remarks are obviously inflammatory, the (social) media stance, right or wrong in fact, will not help calm matters given Trump also stated he had ran against “suppression” pollsters, and the mainstream media, and Big Tech.

The key implication for markets is again that this is likely to get bumpy, and drag on, and through the courts – a process already now underway in a few states, and possibly at the federal level in short order. Notably, Nixon ultimately conceded to Kennedy after losing by just 112,000 votes from 68 million in total, despite being convinced that fraud had occurred, because he did not want the country to go through a constitutional crisis. This election looks like it could perhaps be decided by as few as 12,000 votes from more than double the 1968 total. Yet judging from Trump’s words, a Nixon-style concession does not look like it is going to be repeated.

Over in China, the Global Times makes clear that regardless of who wins, things continue to look bleak for US-China relations: more Trumpism is seen stemming from both the Democratic and the Republican parties. It’s true that the one area of bipartisan cooperation in the US is anything China-related. Moreover, watching the least partisan US political post-mortems finds loud voices from both the Democratic and Republican parties arguing that their future lies with appealing to the working class more – which is not going to sit well with free trade and free markets. Just don’t tell the donors of either party who, like the existing gerontocracies running both, like things just the way they are, thank you very much.

That’s a sentiment obviously shared by US stocks, which have been delighted by the prospect of constitutional chaos and/or political gridlock. Forget about institutional quality; forget about fiscal stimulus; lack of effective governance is obviously the secret sauce for success. That is regardless of initial claims falling just a little yesterday, suggesting the ‘v-shaped’ labour market recovery has now stalled far below where it needs to be, a hypothesis which is likely to be confirmed by the payrolls data today. It is also regardless of the US hitting a new daily record for Covid-19 infections of 120,000. Bond yields, just as obviously, track the other way to stocks and will keep doing so – and if stocks stumble, all the more so.

On that front, yesterday’s Fed meeting did nothing, as expected. As Philip Marey notes, even the statement regarding monetary policy was identical to last time. During his press conference, Fed Chair Powell noted that in recent months the pace of recovery has moderated; and now it appears that we should not count on fiscal policy to provide much support to the economic recovery in the next two years, leaving the FOMC on their own at a time when monetary policy options are almost depleted.

It’s similar glad tidings all over: the BOE voted unanimously to maintain rates at 0.10% and to increase QE by another GBP150bn, which was above our own and the consensus expectation of GBP100bn: the total size of the APF will now rise to GBP 895bn over the course of 2021. Their economic projections were also significantly downgraded: the BOE now sees GDP contracting 11% in 2020, then growing 7.25% in 2021, and another 6.25% in 2022. In our Brit-watcher Stefan Koopman’s view, this is way too optimistic. Indeed, the British government seems to agree, and has just carried out the latest in a series of U-turns, this time to extend the expensive and historically-unprecedented jobs furlough scheme to the end of March 2021. It’s a good job the BOE is paying for all this, isn’t it? It’s an even better job that GBP doesn’t seem to mind so far. Perhaps if the UK has its own constitutional crisis over Scotland, and before that Brexit, things will look different.

Meanwhile, Australia is bracing for de facto confirmation that from today Chinese importers will introduce an “import suspension” of various Aussie goods such as barley, sugar, red wine, logs, coal, lobster, and copper ore and concentrate. The South China Morning Post says “word from custom clearance has been filtering down to importers across China, telling them that shipments could be severely delayed after Friday.” Recall that there is a signed Australia-China Free Trade Agreement in effect; luckily, the Chinese authorities have already clarified that “relevant companies reducing imports from Australia are acting on their own initiative.” One wonders if this factored into the RBA’s latest set of quarterly economic projections released today along with its Statement on Monetary Policy.

In short, how much more happiness can we handle as we head into the weekend?

monetary policy

Author: Tyler Durden

Economics

Foreign Central Banks Accelerate Treasury Selling

The U.S. Treasury released its TIC data this afternoon, which confirmed our priors that foreign central banks continue to sell off their Treasury holdings,…

Continue Reading
Economics

Senator McConnell Expects Wednesday Vote On $40 Billion Ukraine Aid

Senator McConnell Expects Wednesday Vote On $40 Billion Ukraine Aid

Authored by Dave DeCamp via AntiWar.com,

Senate Minority Leader Mitch…

Continue Reading
Economics

The Market Challenge to Populist Antitrust

The wave of populist antitrust that has been embraced by regulators and legislators in the United States, United Kingdom, European Union, and other jurisdictions…

Continue Reading

Trending