Wells Fargo strategists recommend positioning for gains in US duration assets and shorting the dollar ahead of the November 3 midterm elections.
Bank of America strategist Michael Hartnett said investor risk aversion may persist into late November, further indicating that unease surrounding artificial intelligence trades and the US midterm elections is weighing on stock market performance.
An Anthropic executive warned that large-scale cybersecurity disruptions, such as the situation this week in which governments and companies across multiple countries scrambled to patch two critical software vulnerabilities, could get "much worse before they get better."
Wells Fargo: Favor Long Treasuries and Short Dollar Before Midterms
Wells Fargo strategists recommend betting on rising US duration assets and shorting the dollar ahead of the November 3 midterm elections. "The two most likely outcomes, namely a Democratic sweep of both chambers and a Democratic-controlled House with a Republican-controlled Senate, would both bring some degree of (small) negative fiscal impulse," strategists Erik Nelson, Angelo Manolatos and Francis Brown wrote in a Friday report. They said that if Democrats capture both chambers of Congress, it could be bearish for AI-themed trades, thereby boosting US Treasuries and pressuring the dollar. The report said a potential surprise scenario includes Republicans holding the Senate, which would create the strongest political gridlock and therefore "most likely lead to fiscal consolidation," boosting bonds and weighing on the dollar.
Bank of America Expects Risk Aversion to Last Until Mid-November, With Yields, Stocks and Dollar Potentially Falling Together
Bank of America strategist Michael Hartnett said investor risk aversion may persist into late November, further indicating that unease surrounding artificial intelligence trades and the US midterm elections is weighing on stock market performance. "We tactically maintain a risk-off stance into mid-November," Hartnett wrote in a Friday note to clients. He said: "Expect a trading pattern of lower yields, lower stocks and a lower dollar." Hartnett said the market still needs to fully price in the possibility of Democrats winning control of both the House and Senate. He believes such an outcome would end the current low-tax, low-regulation policy environment, which would be unfavorable for corporate earnings growth.
AI Is "Industrializing" Vulnerability Discovery; Anthropic Executive Warns Cybersecurity Risks May Worsen Further
An Anthropic PBC executive warned that large-scale cybersecurity disruptions, such as the situation this week in which governments and companies across multiple countries scrambled to patch two critical software vulnerabilities, could get "much worse before it gets better." This week, multiple banks, airlines and governments worldwide took websites offline as a precaution to avoid hacker attacks. This followed cybersecurity researchers using AI to discover vulnerabilities in the open-source programming language PHP, which underpins a substantial portion of the internet. Anthropic Deputy Chief Information Security Officer Jason D. Clinton posted on X on Thursday: "The past 4 days have already been bad, but it will get much worse before it gets better. Security leaders, don't waste any crisis, go to your board now and ask for help. Not for AI, but for the most basic security work."
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