Of Elections and Term Premium - November Macro Snapshot

Update: Our refreshed Keys to the White House framework shows a narrow Trump win. This would constitute a “change” election, which historically reverses equity sector leadership. Positioning implies term premium is biased lower, no matter who wins, while a Trump sweep = US dollar stronger for longer.

• Keys to the White House framework refreshed: narrow Trump win
• Lessons from election history: “change” elections reverse sector leadership
• Lessons from election history: LatAm buy the rumor, sell the fact analogy
• High frequency US growth data still holding up
• Macro regime still shows balanced risks: policy the main positive
• Fed has smaller window to cut, but nominal neutral rate is likely 4%+
• US housing leading indicators are recovering
• Equities: elevated EPS growth estimates + high multiples = limited upside
• Fixed income: positioning implies term premium biased lower, no matter who wins
• Oil: demand weakness persists in China, unlikely to be stimulus beneficiary
• FX: Trump sweep = US dollar stronger for longer