While economic momentum looks pretty clear in the near-term, pretty much every asset market has already priced strength ahead.

PEs & 12m fwd earnings are high. Spreads are low. And Gold & USD are both just off highs. Rates look like the main exception.

Thread w/ updated views. Any time you are trading markets, it's critical to not just understand the macro dynamics but also compare that to what is priced in to find opportunities.

While the momentum looks pretty clear (described below yesterday), a lot of that looks priced in.

https://x.com/BobEUnlimited/status/1858163011875225809

If the new admin is going to deliver on the pro-growth, pro-US campaign rhetoric, markets aren't really believing it yet.

Stocks are only up 1% from late Oct with the recent fall, 10yr yields are only up 15bps, and the dollar's modest 2.5% rally has started to fade.

Thread. Stocks provide the best indication of whether the pro-growth, and pro-corporate agenda central to the Trump campaign is getting priced in.

While stocks popped 5% on the election news, the recent selloff means we're at levels only about 1% above the pre-election week levels.

In a world full of stagnation, over easy monetary and fiscal policy is counterintuitively dollar positive.

Policy juicing of the economy drives more capital to the US taking advantage of higher relative yields and stronger expected growth, pushing the dollar higher.

Thread. The dollar made new highs today for the year on DXY and has been on a tear over the last 8 weeks. It started just after the Fed re-wrote the reaction function in Sept to pursue over easy policy, and has since been reinforced with policy expectations post-election.

Inflation has leveled off above the Fed's mandate and yet JP keeps cutting, confidently claiming it is going back to 2%.

A range of datapoints indicate inflation has been roughly stable at these levels for 12-18m, suggesting the Fed's view is more hope than reality.

Thread. Inflation reports have lost their significance after the Fed largely re-wrote the reaction function in Sept, indicating comfort delivering more cuts despite elevated readings.

Expectations for today's data suggests core CPI remaining stable at 3.3%, well above pre-covid levels.

Will the Trump admin deliver on their pro-growth agenda ahead?

Even tempered campaign rhetoric suggests a notable positive support to the US economy (even with some tariffs), and still looks underpriced relative to the mere 4% rally post-election.

Thread. Campaign rhetoric should not be confused with actual implemented policy, but instead provides a framework on the shape of what is likely to be delivered.

In Trump's case, it suggests larger deficits and a lot of support to high-propensity spenders and corps.

Earnings season kept going last week despite all the policy noise, and overall it's still looking like a pretty soft quarter.

3Q earnings growth at 5% and pickup in downward revisions for 4Q suggests near-term isn't all that great despite an expected margin boom ahead.

Thread. S&P earnings this quarter have clocked a 5.3% earnings growth (vs a pretty elevated backend quarter) with 91% of companies.

Roughly in line with nominal GDP growth over the period and only modestly above expectations of 4.2% coming into the quarterly releases.

Accept it, meaningful China stimulus isn't coming any time soon.

Chinese policymakers remain almost laughably focused on the wrong policies at the wrong size, with today's debt swap announcement projected to save *0.08% of GDP* in financing costs annually.

Thread. There was some hope that the Chinese Standing Committee meeting this week would result in meaningful policy outcomes to support growth ahead. All that came was re-affirmation of a debt swap program meant to bring "hidden" local gov debts into the light.

As we wake up this morning, looks like an R sweep is now a pretty clear lock, removing nearly all election ambiguity.

Market action lining up with falling uncertainty and pro-growth policies ahead, favoring stocks relative to bonds and USD relative to other FX & gold. Thread. The results pretty much remove all the of uncertainty about the election outcome, which importantly largely eliminates the tail risk of a protracted conflict. An important driver of stocks pushing higher despite sharply higher yields.

While focus is on the US election & Fed, China's Standing Committee meets this week to discuss stimulus plans which could have even greater impact on the global economy.

Initial signs suggest it remains far too little relative to the challenges facing China's economy.

Thread. China faces a pretty classic debt deleveraging and while policymakers have given some signs of a desire to reverse it, the policy commitments so far have been far too small and too off target to make a meaningful impact.

The big reason? Fiscal spending remains flat:

The Fed plans to cut 150bps over the next 12m into an economy with strong growth, strong employment and inflation still above mandate.

The epitome of "Over Easy" policy.

Thread. Growth remains stable and pretty strong no matter how you slice it.

Real growth ~2-3% for a couple years now. Nominal stable at ~5%. And remember this occurred in a pretty stable interest rate regime suggesting current rates are closer to neutral instead of "very restrictive."

Lots of incremental data on key themes in the last 24hrs. A rundown:
-The BoJ isn't tightening much anytime soon
-Eurozone is stronger than most expected, but cuts press on
-UK budget release was received poorly, a precursor to the response to even larger US deficits?

Thread. I've been highlighting for awhile that there is no urgency for the BoJ to tighten meaningfully any time soon based on the economic data. More of the same overnight, and more of the same to come if the bond market is any indication:

https://x.com/BobEUnlimited/status/1851936165202468866

When everything is already going up (other than bonds), adding further monetary and fiscal easing to the mix will only serve to further inflate the financial asset bubble.

Thread. Typically policy easing only happens when there is a deterioration in economic conditions. But today that's not the case - real growth remains 2-3%, unemployment remains low, and asset prices are already pushing highs.

Easing into strength is classic "over easy" policy.

The selloff in US bonds has sparked a global dump of developed world sovereign debt.

Since US yields started rising after the Fed meeting in Sept, global bond yields are higher, while the dollar and gold are surging, reflecting an increasingly global debt contagion.

Thread. While many in the US are laser focused on the US yield rise in recent weeks, what is notable is how it looks to be flowing through to global bond markets in a way that is pretty disconnected from their own underlying domestic conditions.

US yields up nearly 70bps since mid-Sept

Harris proposals to *twist* the budget by increasing transfers to lower income cohorts and tax higher income earners will lead to higher growth *and* higher inflation.

But it is unlikely to come to fruition since it requires agreement from a likely divided congress.

Thread. The proposed policy list from the Harris administration is increasingly becoming a laundry list hoped for tax credits, cuts and subsidies:

https://x.com/JohnArnoldFndtn/status/1845874302601592994

As I described just after the Fed pivoted policy, their choice to purse "Over Easy" policy is unusual, but the macro linkages are clear, favoring:
* Stocks and gold over bonds
* The dollar over other currencies.
* Rising bond term-premium

That's what's happened. Thread. Stocks are up.

If your manager or PM is making bets claiming edge in calling the US election, you should fire them.

Thread. The most challenging dynamics in risk management are impactful, bi-modal outcomes with significant uncertainty since it is hard to truly hedge the outcome. Across nearly all measures, this is one of those instances.

The presidential outcome is a coin toss up:

The BoC's likely 50bps cut today is a reminder of the type of conditions that call for an aggressive easing.

Canada is weak: UE rate rising rapidly, inflation at or below target, and anemic GDP growth (particularly on a per-capita basis). Big diff from the US.

Thread. Canadian conditions are pretty weak, with GDP growth running at a mere 1% on an annualized basis over the last couple years, which is notably soft given the elevated labor force growth from rapid immigration.

Prospective Trump admin policy would be far more impactful to the macro economy than those proposed by Harris.

While both plan substantial policy shifts ahead, Trump can implement much of his agenda without congress and has a higher probability of a sweep.

Thread. In recent weeks probability of a Trump election has increasingly been priced into financial markets, making it increasingly important to understand the implications of the admin prospective policies.

Here @Citrini7's well-constructed index which captures the move:

Japan has no inflation problem and little urgency to tighten.

All those folks claiming the JPY carry trade is going to blow up global markets will be disappointed. Not only does the carry trade not really exist in size, the BoJ isn't going to do much any time soon.

Thread. Japan doesn't have an inflation problem and today's data further reinforced little urgency to tighten.

Services inflation has fallen to roughly zero in recent months, suggesting little signs of inflation entrenchment in the economy. Very different from the rest of the DW.

US banks are doing pretty good, even those regional ones everyone was so worried about.

But most banks have remained reticent to extend credit. With banks' conditions improving & the economy doing well, banks are well positioned to lend as demand for credit picks up.

Thread. 18m ago just after the SVB situation many folks argued that the banking system was going to bring down the whole economy. But in the intervening time, conditions for these banks have improved substantially.

$KRE is back to pre-SVB levels is a good example:

A month ago the Fed made clear their intention to run "Over Easy" policy ahead, which favors stocks and gold relative to bonds, a steepening of the YC, and a stronger dollar.

That's pretty much what has happened since.

Thread (with some updated views). At the Fed meeting on Sept 18th the Fed cut 50bps, but more importantly JP made the case that aggressive cuts were coming *and* the economy was strong.

That combo suggested Fed was intentionally pursuing accommodative policy relative to conditions.

https://x.com/BobEUnlimited/status/1836884469967368579