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A week that goes down in history! Global funds focus on China and the United States, with three major macro events about to take place

寒江雪176
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American voters will hold a nationwide vote this week to elect the next US president, and the Federal Reserve will provide more official insights on the latest benchmark interest rate, as well as the outlook for the US economy and future interest rate paths at its November monetary policy meeting. In China, the 12th meeting of the Standing Committee of the 14th National People's Congress is scheduled to be held in Beijing from November 4 to 8. It is widely expected that this meeting will consider the issue of raising the government debt limit and promote a new round of debt resolution.
The week starting on November 4th may be a "super heavyweight week" that will be recorded in the history of global financial development. Three major macro events that can be described as "incredibly heavyweight" may have a decisive impact on the global financial market and the direction of global funds.
The globally anticipated results of the US election are about to be announced
Firstly, it is the voting day for the US presidential election on November 5th Eastern Time, marking the peak of the presidential election cycle. This cycle has attracted the attention of top Wall Street investment banks and triggered fluctuations in almost every corner of the global financial market. One of them is the dramatic rise and fall of the so-called 'Trump deal', a series of asset price changes reflecting the strong election sentiment of Republican candidate and former President Donald Trump in his battle against Democratic candidate and current Vice President Kamala Harris for the presidency of the United States.
As the world's largest economy, the election of future leaders in the United States will undoubtedly attract the attention of major global funds. However, it is highly likely that the results of this US presidential election will not be announced as usual on the day of the November 5th election or the next day Eastern Time, but may take an additional few days to be announced.
In the previous election, due to the very similar election situation in swing states in the United States, officials from each state spent four days counting all the votes: after the voting ended on November 3, Biden officially announced his victory in the presidential election only after the Pennsylvania vote counting results were fully announced on November 7.
And this time, considering that the poll approval ratings of Trump and Harris are getting closer compared to the 2020 Biden Trump elections, the vote counting in some swing states may take longer.
The so-called "Trump transaction" mainly includes the appreciation of the US dollar and the selling of US treasury bond, as well as the soaring price of Bitcoin. The soaring price of Bitcoin is mainly because Trump has repeatedly expressed his support for the development of US cryptocurrency. People hope that Trump will lift many regulations on the cryptocurrency industry.
I will return like lightning. "Trump's bold words may soon become a reality. The 'Trump deal' has been in full swing recently, with betting predictions tracking the US election showing a significant increase in the likelihood of Trump being elected to over 60%. The 'Trump deal' wave is once again sweeping the globe. The "Trump transaction" covers a wide range of areas. Wall Street traders and strategists generally agree that Trump's re-election as president may implement extremely loose fiscal policies and more large-scale trade protectionism. Therefore, driven by the expectations of these two policies, the exchange rate of the U.S. dollar against multinational currencies has strengthened significantly in recent days, and the yield of treasury bond bonds of the United States of America in various terms has also risen significantly due to the wave of "Trump transaction".
Despite this, the two sides are still deadlocked in opinion polls initiated by American media, with Harris even slightly surpassing Trump in recent polls. Some investment institutions predict that regardless of the outcome, voting data will be accompanied by significant fluctuations in the financial market.
Regardless of the situation, there seem to be some short-term risks, "said Walter Todd, Chief Investment Officer of Greenwood Capital.
Todd said that the Republican victory under Trump's leadership could be an important trigger event of a "news selling" nature, which could trigger intense profit taking in Trump's deal. He also stated that Harris' election victory could trigger a more severe sell-off.
The analysis team of Citigroup, a major Wall Street bank, recently released a research report stating that the market has partially priced the possibility of Trump winning the election, indicating that the risk return ratio of Trump related transactions has deteriorated. Therefore, Citigroup believes that investors should take profits on some "Trump oriented" positions, especially those assets related to Trump policies and improved public opinion polls. According to data statistics, these assets have performed well since the release of the non farm payroll report in September, but Citigroup believes that the current risk return is no longer attractive.
The specific control of the US Congress will also be decided through a vote on Tuesday Eastern Time, which adds another challenge for investors as they have to weigh the long-term impact of various political outcomes on assets. The two candidates provide vastly different development paths for the US economy.
When Trump was last elected as the President of the United States, the performance of European stock markets was the worst among the past eight US administrations compared to the US stock market. The trend of European stocks during the Trump administration has important reference significance for the global stock market during the US election period, especially for the stock markets of many Asian countries that rely on export economies.
If this Republican candidate defeats Democratic candidate Kamala Harris, he is highly likely to implement trade protectionism policies against many industries in Europe that heavily rely on exports, which could severely damage the European stock market. This explains why some investment institutions expect the European stock market to repeat the same mistakes.
For example, the expectation that Trump will seek to reduce regulatory scale will greatly benefit bank stocks, while higher tariffs may benefit small companies focused on the US domestic market, while increasing the likelihood of broader global market volatility.
In a stock research report on Friday, the JPMorgan analysis team stated, "Overall, we expect the most important outcome in the short term to be related to corporate tax rates, as there are significant policy differences between the two potential administrations in this area
Neil Burrell, Chief Investment Officer of Premier Miton Investors, stated that the news of Trump's potential victory is gradually being "digested" in Europe. He said, "People are moving away from those stock targets that did not perform well during the previous Trump administration
Wall Street analysts generally say that Harris' expectation of greater support for clean energy initiatives means that if she wins, solar and other renewable energy stocks may accelerate their gains.
Investors are also concerned about the uncertainty of the election results, which may be difficult to determine in the short term due to intense competition or opposition from one party. In 2020, Trump attempted to overturn the election results he lost to Joe Biden, falsely claiming that it was caused by voter fraud in multiple states.
Robert Pavlik, a senior portfolio manager from Dakota Wealth, said, "The market actually performed well during the Trump administration. It can also perform well under Harris' leadership. We just need to figure out their policy direction
After election day, the Federal Reserve's interest rate decision will be announced
The Federal Reserve's decision on monetary policy on Thursday Eastern Time is another core risk factor for this year's bull market surge of approximately 20% in the S&P 500 index. In the previous week, the performance reports of American tech giants including Microsoft and Apple were mixed, causing the index to close down in October after five consecutive months of gains. The Nasdaq Composite Index, which covers many tech stocks, also closed down in October after seven consecutive weeks of gains.
In terms of profit data at the numerator end of the DCF model, technology giants that hold high weights in the S&P 500 index and Nasdaq composite index have failed to provide strong enough profits and performance guidance to drive up the numerator end data of the DCF model. Therefore, the market is urgently waiting for the Federal Reserve to announce interest rate cuts and release "dovish cut language" to lower the denominator end risk-free interest rate expectation, thereby driving the US stock market to continue its strong upward trend of hitting new highs.
According to data compiled by LSEG, the pricing of federal funds futures trading shows that after announcing the first interest rate cut in four years in September, interest rate futures market traders are betting that the Federal Reserve will slightly lower its benchmark policy rate by 25 basis points this week, and traders are betting that a gradual 25 basis point rate cut will also be maintained in December thereafter.
For many investors, the focus will be on the interest rate path guidance provided by Federal Reserve Chairman Jerome Powell at a press conference, as well as whether the Fed will consider suspending its rate cut cycle at future meetings given strong economic data.
In terms of the market focused 'Citigroup Economic Surprise Index', which measures the performance between economic data and market expectations, it is currently at its highest level since April. Last week's statistics showed that the US economy continued to grow steadily at a rate of 2.8% in the third quarter. The most favored inflation indicator by Federal Reserve officials, the core PCE inflation indicator that excludes volatile food and energy components, recorded the largest monthly increase since April in September's statistics, and the year-on-year increase in core PCE in September was slightly higher than economists' general expectations. These data can be said to provide important basis for the Federal Reserve to slow down the pace of interest rate cuts after unexpectedly cutting interest rates by 50 basis points last month.
The monthly non farm payroll report on Friday is the last key data before the Federal Reserve's interest rate meeting, which goes against the initial GDP value implying sustained economic growth in the United States and the strong trend of consumer spending data, as it shows that non farm payroll growth in October has almost stagnated. However, the aerospace industry strike and the sudden hurricane have affected the response rate and specific statistical data of wage surveys, casting a strong shadow over the data. This has also led some economists to emphasize that the Federal Reserve will not overly value this extremely weak non farm payroll employment data distorted by numerous "noises".
Economist Michael Feroli from JPMorgan Chase stated in a report that "recent economic data... suggest that the reasons for interest rate cuts are still valid." "Even if election day is decided before Thursday, we still believe that there is enough uncertainty in monetary policy and economic prospects, so the Federal Reserve should be cautious about forward-looking interest rate paths and economic guidance.
The weak non farm payroll data in October in the United States is not only due to hurricanes, but we also see signs of economic slowdown in some regions of the country. We believe that this employment data will prompt the Federal Reserve to announce a 25 basis point rate cut at its November and December interest rate decision-making meetings, and gradual rate cuts will be the theme for the coming period, "said Anna Wong, an economist at Bloomberg Economics.
Renowned journalist Nick Timiraos, also known as the "New Federal Reserve News Agency," recently stated that it is expected that Fed officials will cut interest rates by 25 basis points as scheduled at Thursday's meeting,
However, Timiraos mentioned that Federal Reserve officials may still engage in a tricky debate in the coming months: "Firstly, to determine at what level interest rates should stabilize. Secondly, although the election results will not affect this week's interest rate decision, any policy changes at the level of the next president and congressional power that reshape the economic outlook may also change the Federal Reserve's interest rate path
The Standing Committee of the 14th National People's Congress, which is concerned by global funds
The 12th Meeting of the Standing Committee of the 14th National People's Congress is scheduled to be held in Beijing from November 4 to 8. The market generally expects that this meeting will review the issue of raising the government debt limit and promote a new round of debt resolution work.
The previous October 12, the Ministry of Finance held a press conference to introduce the latest fiscal policies. The department mentioned that the central finance still has a large borrowing space, and plans to increase the debt limit at one time, replace the implicit debt of local governments, and issue special treasury bond to support large state-owned commercial banks, but the specific scale has not yet been announced. According to regulations, important matters related to fiscal budget, debt scale, etc. require crucial approval from the Standing Committee of the National People's Congress before implementation.
Since the sharp rise of China's stock market (including Hong Kong shares and A-shares) from the end of September to the beginning of October, most foreign institutions have made profits in the middle and late October and temporarily left the Hong Kong shares and A-shares market. Therefore, the final review results of the Standing Committee of the National People's Congress, scheduled to be held in Beijing from November 4 to 8, are crucial to whether Wall Street and the entire European and American investment institutions will once again flood into China's stock market.
In addition, the official results expected to be announced on the 8th will have unparalleled influence on the recently highly popular "overseas listed Chinese asset ETFs", which have a huge appeal to foreign funds and are the best entry point for foreign institutions to invest in Chinese listed companies.
The iShares China Large Cap ETF (FXI. US), a popular ETF focused on Chinese assets listed on the New York Stock Exchange, broke through the $10 billion mark in October, highlighting the continued enthusiasm of foreign funds for investing in Chinese assets, especially Hong Kong stocks. Since the beginning of this year, the value of the ETF has risen by as much as 32%, even outperforming the S&P 500 index. IShares China Large Cap ETF fully focuses on the Hong Kong stock market, providing international investors with the main way to invest in China's top listed companies. The ETF covers the 50 largest and most liquid stocks listed on the Hong Kong stock market.
The Goldman Sachs macroeconomic team expects that there will be official disclosure during the Asian session on the afternoon of the 8th. Currently, the Goldman Sachs team expects to launch a multi-year fiscal plan of 6 trillion to 10 trillion yuan for debt replacement and real estate destocking; 1 trillion yuan of special treasury bond, used to inject capital into large banks; In 2025, the issuance of treasury bond and local government bonds will be advanced to this year, because most of this year's quota has been issued in October. Goldman Sachs also emphasized that if the possibility of imposing tariffs after the US election increases, fiscal expansion may exceed expectations.
Another financial giant, Nomura, believes that the overall size of the fiscal stimulus plan (only including new borrowing) may reach between 2% and 3% of GDP in the coming years. In the event of Trump's victory, the plan may be closer to 3%; In the case of Harris winning, the plan may be closer to 2%.
Goldman Sachs strategists latest predict that the Chinese stock market (including Hong Kong and A-shares) will rise within two to three months after the US presidential election. However, they also warned that if former President Trump wins, there may be a "subconscious reaction" in the market.
In their latest report released last week, analysts from the agency wrote, "During the Trump risk repricing period of the past two weeks, Chinese stocks have not experienced a sell-off, indicating their resilience. We believe that risk sentiment in China may turn bullish after the election
Jeff deGraaf, a senior market strategist on Wall Street and co-founder and CEO of top Wall Street investment firm Renaissance Macro Research, recently predicted in an interview that one of the benchmark A-share indices, the CSI 300 Index, may soar 50% within 12 months, hitting 6000 points. Doubt dissipates, valuation advantage, massive stimulus scale, momentum, and trend changes all appear there, "he emphasized in the interview. This is one of the best lineups I have ever seen in my 35 year career
The Shanghai and Shenzhen 300 Index expectations given by this Wall Street veteran are even higher than the 4600 points given by Wall Street financial giant Goldman Sachs, who is known as the "global bull market flag bearer", and higher than the 4900 points given by another Wall Street giant Citigroup.
Goldman Sachs, a Wall Street financial giant known as the "flag bearer of the global stock market bull market," released a bullish research report in October, upgrading the rating of the Chinese stock market (including Hong Kong and A-shares) to "overbought," and raising the target level of the Shanghai and Shenzhen 300 Index from 4000 to 4600. Goldman Sachs also raised the target point of the MSCI China Index, which covers China's core assets such as Alibaba, Tencent and Kweichow Moutai, from 66 to 84, compared with the latest closing point of the MSCI China Index of 66.7. In terms of industry allocation, Goldman Sachs stated that due to increased capital market activity and improved asset performance, insurance and other financial institutions (such as securities firms, exchanges, and investment institutions) will be upgraded to "over allocation"; At the same time, Goldman Sachs maintains its "super configuration" position on China's Internet and entertainment, technology hardware and semiconductor, consumer retail and service, and commodity industries.
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