Do the markets even care about the US election?
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I could see even higher deficits in mixed government, something that a lot of investors are counting on to restrain washington. But I think those investors are forgetting how easy IT is for washington to do deals where one side gets its deficit increases in exchange for the other side .

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If you've been living in a cave on your own with no wifi and your fingers in your ears for the past four years, then i'm here to tell you that finally, finally, the U. S. Presidential election has arrived.

These americans really drag this stuff out. My god. Now, every election I can recall in my entire adult life has been built as the biggest, most important, most consequential ever. But this time, IT really does kind of feel like that. So today on the show, we're asking, the markets even care what the result is. This is on hedge the markets and finance forecast from the financial time and again, i'm Kitty part in a market column at the F T in london portiphar garden bunk er and stocking up on tin food just in case and i'm joins down the line from new york city by none other than rob armstrong, lord of the unhedged news letter. Rob, it's a wonderful day for democracy.

My heart is swelling with patriot IT today. I say, I say that somewhat sarcastically, but only somewhat. I I actually do love election day and american democrat all that. So it's a good day. Whatever happens.

have you voted already and have you kept your vote secret from your wife? I voted .

like a week ago, and no, it's no secret in our households, but i'm not telling you a day thing.

No, I ouldn't vise that you do now. So look.

do markets care what you go first?

What what I was thinking was, antha morphs is bad gay. So it's bad to talk about markets like .

their people yeah. And I think that's particularly true in this case. There is very little that is cut and dried about what this election will mean for markets over the next couple of years.

Some force point one direction, some force is point another. You know, I think people get him tizer by the fact that the last time trump was elected, markets immediately, the U. S.

Stock market immediately rally quite strongly. But that actually made sense and had a very, very simple explanation. He had promised and he won and the republicans won the majority, a majority big enough to deliver a big corporate tax cut.

And at that point, it's just math. Lower corporate tax, higher earnings per share for american companies equals higher stock market. And that just mechanically is how IT goes.

And also, he wasn't Priced in, right? His Victory was a surprise. And so I had to be kind of Priced in at that point.

Yes, everybody knows it's almost fifty, fifty. Now there was there was a glorious moment where the bedding markets were just obviously wrong. They had IT like sixty five or seventy percent to thirty five percent for Harris, which even if you think trump is gonna in dos odds s we're just wrong.

And so I like was like, i've got a bet on this. And so I, I, I took my small amount of money available to a poor journalist, and I wired IT to calls I one of these betting sites. yeah. And in the two days, IT took my money to clear, like the bank transfer, to clear the odds closed by, like fifty percent.

right? So that trading active on strikes again.

yes, my famous trading accused strikes again. But I did a they were still a bit wide and I did even though my guess, and i'm not revealing anything, my guess is we're going to get another trump presence if you put a gun to my head and force me to answer. I still put money down on cma Harris because when the the odds are wrong, you're supposed to put money down. So that's what I did. I mean.

one sort of side issue from this whole discussion is the political betting markets in the states rubbish. And we should never pay attention to them ever again.

They gotten, the point is, when the F. T. Was writing stories about them, write about the time I thought, holy crow, i've gotto jump these odds IT was like, there were these whales, you know, very large single Betters were throwing in off.

People were talking about how the betting community was not representative of the elector that said at sea. But the fact is, greed eventually prevails, right? There are a lot of people like me who are like, well, if the big, dumb whale wants to put a huge bet the other way and the odds are distorted, i'll take some .

of that action. Yeah I mean.

there they're probably not great. I'm not saying they have magical powers of braganza cation, but i'm saying given time, inefficient markets tend to close.

We never learned. We we get all kind of excited about stuff like, you know, betting markets when they have really tell you what you think they are tell. But but in the real world of real Marks, stocks and bonds and that sort of stuff. And again, allowing for the fact that the mother m, which have now said, ys, mod cast is bad, yes, the market thinks trumps gona win, right?

Well, I think so, but it's been varying. So there was somehow at markets interpretation pundit headquarters, there was a decision made a few weeks ago that trump winning was inflationary and growth positive, and that bonds would therefore fall if he won. And the ten year bond became this proxy in the mind of the marketer, people who understand the market for trump winning. And I agree with that.

Does that make me part of kind of some sort of shadowy pundit?

Kab, no, IT just means your one of the pundit sheep is just following the other .

sheep around.

But the ten year has, you know, IT went up wildly when people were thinking thump was a lock, and IT has shaded off a little bit recently.

And yeah.

the ten year yield, i'm sorry, yeah, which goes in the opposite direction of Prices. So that's come in a little bit. And the interpretation is that is the market saying wo it's not a done deal that trump is gonna win, which seem to be what the market thought and is basically .

like if you kind of get a chart of the U. S. Ten year years, you overlay that a chart of what the dollar has done over the same period, they're pretty much match one to one.

So the idea that OK trump is inflationary, more inflationary than Harris is, is the kind of yes idea. And if that is true, then that means that the fed is not going to be able to cut interest rates as quickly as the market has been anticipating. So that means weak bones I higher yields and IT means a stronger dollar. And again, in both cases, you know, those big sort of shifts have kind of tailed off a little bit later. There's a bit more caution now that says a maybe it's not.

And the reason this signal is particularly strong right now is that there is already a gap between U. S. Interest rates and the rest of the world.

In other words, amErica has strong economic growth. Europe, japan, china, not so much. So there is already a rate differential, which is is why the dollar moves so much. If if rates, they even higher in the united states and they keep falling in the rest of the world, right, that mean that that rate differential gonna draw capital to the united states and that's gonna an the dollar gets stronger. So that's the kind of moment that we're in this moment where amErica is the the economy that's kind of dragging the rest of the world behind IT.

Now meanwhile, stocks, as far as I can tell.

don't care. No, I think that's right. IT is hard. We wrote a newsletter about this the other day, and IT is hard to say decisively of any sector of the stock market.

This sector is gonna do Better under trump than Harris or Better under Harris than trump. I mean, you could say broadly, Green investments might do Better under Harris. But other than that, it's really not obvious.

I'll give you an example. Tech, right? So the tech people, the thing they really hate is len kon, who runs any trust policy under a president biden. They do.

They .

hate her so much. And the idea is, well, if trump gets in, she's gone, right? And that is good for tech. But on the other hand, there is this guy running for a vice president called fans who has said the only person he likes in the biden administration is con.

And he is a kind of one of these right wing cultural conservatives whose extremely suspicious of silicon in all of its works, even though, ironically, he's worked in that world as a venture capitalist. So he's like, weird mixed up identity is a wild card in this this whole discussion. So it's not clear who who is more protect camera also said to have a links to silicon valley and maybe being more friendly to the tech world than her boss biden was. So it's it's extremely hard to say this .

is like anecdotal, but I think IT holds what we would call the real money community, right? Big asset managers, pensions insurer. Those kind of big slow moving cin markets are running into this event pretty much as neutral they can be yeah you know no one's got an edge here.

No one knows was gonna happen, as we've been discussing right, is not immediately. Obviously, the market reaction would be in either events. So those kind of investors are running into this neutral. yes. But hedi, like the macro o hedge funds from what I can gather are are pretty much .

all in on trump .

yeah and that's not to say that they're right or that they're wrong. But what IT what IT does mean is those sources of accounts trade very quickly and very aggressively. So that means that if they're right or if they're wrong.

there could be like quite a lot of short term volatility. A hedge fund and i'm looking at trump, I say he's going to try for another tax cut that gets stocks and you can say he's onna spend a ton of money. And that is relatively bad for bonds and relatively good for equities.

Equities may not do great, but they'll weight. So you could see a kind of let's get what let's be long equities, let's be short bonds and a let's be long a dollar and let's get that trade in. And yeah, it's a close election. But you you you know as micro themes, I I would think those would be readable, yes. But there is another thing to consider here, which is perhaps short term, which is the market just generally likes certainty.

So I was talking to one money manager last week and he said, look, if you get a decision, any old decision that is gonna market positive for like a month, just like the market kind of sign and relief and saying, we don't have to think about this crap anymore, right? Exhaust is exhAusting. And but you know whether we're gonna get a decision. He said to me, the only way that could possibly happen is if cma concedes, because Harris will concede if he loses, even in a relatively close election. I think we have some historical reason to think that trump will not concede, even if he loses by a significant gin, which will mean this sort .

of drags on. yes.

I mean, IT did.

That was the whole thing was the whole.

So so I have no idea, like at what point do we know and I don't think the market is gona like IT very much if we're just turning along, not knowing for what could be a couple of weeks.

The other thing that I think is a big kind of take away for this that we must remember next time there's an election because others will fall into the same trouble over again, which is investors don't know yes, like the markets don't know anything. No one knows anything in yeah.

they're not magic you know magic more they don't know this any more than they know what the next quarter earnings that nobody notice you're gna be or lilly, you're gonna be. You have a lot of a lot of smart people trying to figure out what microsoft earnings are gonna the next quarter, but there's still surprises, right? There's an incredible amount of brain power trying to anticipate these market events, and the market still manages to surprise. And it's the same thing with polls in elections.

Speaking of which, but the fed this week and way we do.

they're onna cut twenty five basis points. Normally, the fed .

announced its its rate decisions on a wednesday, but it's doing IT on the third data. Like I got this right, like they are pushing IT out specific because .

I didn't know that, I didn't know that they pushed IT up because of the election. But the that last jobs report, which .

stank you yuk, next number.

twelve thousand jobs you supposed to have more than two thousand jobs that locks in a rate cut, a twenty five pointer and IT probably makes one a december .

pretty likely. yeah. So you think they're go twenty five best points are a portion potential rather than repeating the half point?

No, I think now that they're gonna single strongly, that they're on an easy path and are going to take IT very gradually at twenty five a time. Jobs numbers are valid. Inflation numbers are all at all. If we've learned anything in the last six months is that the narrative around those two numbers, employment and inflation, can change entirely very quickly. So we may be feeling differently in a month, not because of the election, just because then, you know, the next time the jobs report comes out, the next time C P I R P C A inflation comes out, we're telling a whole different .

story about .

the economy. Yeah, it's almost destiny baLanced as the election you might.

Beautiful, I think you've done. But one thing just to wrap up, tell me, please, rob, on strong. When will we know the results? When will this nightmare be over?

I predict that IT is going to be drawn out. Kd, so buy a lot of tea, turn off your television and come back in a couple of weeks. We will not know that i'm in a fearlessly predict. We will not know this week.

Well, either way, you and I could be back in a sec with long shot.

IT was worried ticula ly, with the rise of of zoom, the rise of television, that we were going to repeat the one thousand nine hundred seventies. And we are, we going to see an attempt deal with these unfair, unequal things. But we were going to do IT by not keeping city safe, by not keeping our city tax rates low, that we were going to have the same type of mass escape enabled by zoom enable by remote work. Economic act of our voting after p gms. The outthinking investor in your favorite podcast, APP.

already listeners. Now it's time for a long, short that pot, the show where we go, long a thing we love or short a thing we hate. Rob armstrong.

what do you go? I have a terrible conflict because I have two longs that contradict each other. First of all, i'm long nuclear power.

I think it's would be good if we had more of IT. I think given our climate problems, I am pro nuke. At the same time, however, I am very long bees, which are my favorite animal, because they are so cute with their little stripes.

They both staying and make honey, which makes them like rich father. For literary metaphors of all kinds live in cool hives. They have a social structure is basically either the cool is animal, there is.

But then I read this headline in the F. T. Metta's plan for nuclear powered A I data center thwarted by rare bees, which is first of all the funniest headline I think .

I ever read .

in our newspaper, strong. And so the basic ideas they were proposed building know a small nuke uh to power their A I data center. And I turned out on the site of the the would be sight of this plant, there are some rare peace so they can build. So what am I to do? Kitty, i'm long peas and long nuclear power, but now the two are in conflict.

What do I do? Pick a side. It's gotta the bees or the nex.

Okay, I guess i'll go with the nukes, man. I think the beza is going up to lump at this time. We all have to make .

sacrifices to solve global warming. Well, also, on an animal theme, I am limit long peanut. The squirrel missed peanut story.

Tell me about peanut. So look.

some of IT that you're just gonna have to google yourself. Some of IT is not not suitable for work. Yes, but the summary is there's like a tiktok 的 maga squirl that was kept in someone's house， someone's apartment somewhere. And IT became a far right talking point after IT was killed by the police. But then IT all got even more tangled. When I turned out the the squirrel based tiktok, I think this good, a war, a little outfit in these tiktok, I haven't checked them out and I don't intend to because what later transpired is that these tiktok, or a kind of almost like A A kind of gateway drug into the squirrel owners only fans sites. So it's like everything that kind of wrong with amErica and social media, like all in one squirrel yeah and for those reasons, i'm limit long P.

R, I, P, peut man, you burned bright. Kate, this was fun. I'll see you next week when we still won't know who is president. Now.

I just got bett listeners. Assuming the world has not ended, we will be back in your ears on thursday. So good luck to the states and will be back then on.

Hetch is produced by jake harper and edited by brian earth. At our executive producer is jake of go to ding. We had additional help from top, a forehead shower roma as the F T S global head of audio.

Special thanks to Laura k alea mai gretel on and nately cylon F T premium describers can get the unheard newsletter for free. A thirty day free trial is available to everyone else. Just go to F T dot com slash unchanged offer. I'm kate Martin. Thanks for listening.