In the lead-up to the US presidential elections in November, financial analysts and strategists are closely monitoring the shifting odds of different candidates winning and how it could impact various markets, particularly bonds. According to multiple reports from reputable sources like Goldman Sachs and Bloomberg, there has been a notable shift towards former President Donald Trump's favor following the first presidential debate.
Goldman Sachs reported that markets have revised up odds of a Trump victory based on the debate performance, with analysts expecting more pronounced USD strength from such a shift than what was observed in FX markets. The bank also noted that there were clearer indications of USD strength right before and during the early stages of the debate but other factors may have obscured its impact.
Morgan Stanley and Barclays Plc. are among other financial institutions reevaluating the potential impact of a Trump presidency on the bond market. They are urging clients to position for sticky inflation and higher long-term bond yields in anticipation of a Trump victory in November.
Trump's trade policies, particularly his stance on tariffs with China and Europe, could be a significant factor influencing the bond market if he is reelected. During his first term, he started a trade war with these countries and indicated that he would continue this policy in a second term with across-the-board tariff increases.
Despite these predictions, there was little movement in relevant ETFs like the iShares MSCI China ETF (MCHI) or the iShares MSCI Eurozone ETF (EZU) on Friday, suggesting that investors are not yet ready to worry about this risk.
It is important to note that these predictions come with their own biases and uncertainties. As a neutral journalist, it is crucial to provide a complete and factual story without any bias or deception. The information provided above should be used as a starting point for further research and analysis.
