Are You Ready for NOV?

Mickey082024
11-01

๐™’๐™๐™–๐™ฉ'๐™จ ๐™๐™–๐™ฅ๐™ฅ๐™š๐™ฃ๐™ž๐™ฃ๐™œ ๐™ฉ๐™ค ๐™ฉ๐™๐™š ๐™—๐™ค๐™ฃ๐™™ ๐™ข๐™–๐™ง๐™ ๐™š๐™ฉ?

The bond market experienced a period of turbulence in October, characterized by a sharp drop in prices and a consequent increase in yields. The yield on the 10-year U.S. Treasury exceeded 4.20%. Below, we will analyze the main factors that contributed to the movement in the bond market, with particular attention to the impact of the upcoming U.S. elections.

๐Ÿญ) ๐™๐™๐™š ๐™ž๐™ข๐™ฅ๐™–๐™˜๐™ฉ ๐™ค๐™› ๐™œ๐™ง๐™ค๐™ฌ๐™ž๐™ฃ๐™œ ๐™.๐™Ž. ๐™ฅ๐™ช๐™—๐™ก๐™ž๐™˜ ๐™™๐™š๐™—๐™ฉ ๐™ค๐™ฃ ๐™›๐™ž๐™ฃ๐™–๐™ฃ๐™˜๐™ž๐™–๐™ก ๐™ข๐™–๐™ง๐™ ๐™š๐™ฉ๐™จ:

Both candidates for the White House are unable, or rather do not have strong intentions, to manage the public spending problem. The U.S. budget deficit grew to $ 1.833 trillion for fiscal 2024 (8% higher than in 2023), and interest on the federal debt topped $ 1 trillion for the first time. This is the third-largest federal deficit in U.S. history, following pandemic aid in 2020 and 2021. This situation results from years of expansionary fiscal policies and has important implications for financial markets. The increased supply of Treasury securities needed to finance this debt may lead to higher interest rates and greater volatility in bond markets.

Living in a period of higher interest rates

Three of the primary interest rate drivers are the Federal Reserveโ€™s (Fedโ€™s) policy rate, economic growth and inflation. Beginning in 2021, inflation began climbing quickly, and interest rates followed soon after. The Fed also responded to the resurgence of inflation by raising its target federal funds rate by over 5% from near zero between March 2022 and July 2023. As shown here, the yield on the benchmark 10-year Treasury note has, in recent months, traded at its highest levels since 2007.

๐Ÿฎ) ๐™„๐™ฃ๐™›๐™ก๐™–๐™ฉ๐™ž๐™ค๐™ฃ: ๐™– ๐™œ๐™ง๐™ค๐™ฌ๐™ž๐™ฃ๐™œ ๐™ง๐™ž๐™จ๐™  ๐™ž๐™ฃ ๐™ฉ๐™๐™š ๐™˜๐™ช๐™ง๐™ง๐™š๐™ฃ๐™ฉ ๐™š๐™˜๐™ค๐™ฃ๐™ค๐™ข๐™ž๐™˜ ๐™จ๐™˜๐™š๐™ฃ๐™–๐™ง๐™ž๐™ค

The risk of a new inflationary flare-up is increasing, fueled by several factors. The economic policies proposed by the candidates in the next elections, both Kamala and Trump, could contribute to this scenario. First of all, the increase in the public deficit as already described above. The protectionist measures announced by Trump, in addition to creating strong trade tensions with the countries involved, risk a short-term inflationary flare-up because many imported products would not be immediately replaceable with domestic U.S. products. Finally, an overly restrictive immigration policy implemented by Trump could reduce the available workforce.

Who Benefits?

Inflation makes it easier on debtors, who repay their loans with money that is less valuable than the money they borrowed. This encourages borrowing and lending, which again increases spending on all levels.

๐Ÿฏ) ๐™Ž๐™ฉ๐™–๐™œ๐™›๐™ก๐™–๐™ฉ๐™ž๐™ค๐™ฃ๐™–๐™ง๐™ฎ ๐™ง๐™ž๐™จ๐™  ๐™–๐™ฃ๐™™ ๐™ž๐™ข๐™ฅ๐™ก๐™ž๐™˜๐™–๐™ฉ๐™ž๐™ค๐™ฃ๐™จ ๐™›๐™ค๐™ง ๐™ข๐™ค๐™ฃ๐™š๐™ฉ๐™–๐™ง๐™ฎ ๐™ฅ๐™ค๐™ก๐™ž๐™˜๐™ฎ

Despite the resilience demonstrated so far, the U.S. economy may be on the verge of a slowdown. The economic policies of the next administration, whether Democratic or Republican, risk fueling the explosion, creating a dangerous cocktail of stagflation. Such a scenario would severely limit the Federal Reserve's room for maneuver, forcing it to keep rates high and thus slowing down the recovery of the bond market. The bond market is going through a period of strong volatility, where the next American elections will play a fundamental role in future movements. Even on the currency market, we have seen a strong recovery of the U.S. dollar against other major currencies. The resilience of the American market, the risks of further inflationary pressures, the American elections and the macroeconomic scenario all appear to be favorable elements for the U.S. Dollar.

Farewell October: Are You Ready for the Best Month?
October has seen significant market volatility. Chinese stocks experienced a continuous rise in early October but stalled after China's National Day holiday. The election trades then undoubtedly became the busiest focus of October, with DJT rising nearly 200% and Bitcoin returning above $70,000. Nvidia hit a new all-time-high, briefly surpassing Appleโ€™s market value as the top company. With so many dazzling gains, have you made money? How do your October portfolio look like? Are you ready for the best month in stock market?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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