#5things to know before the bell
Trump trade, jumbo rate cut odds, AI trade, JPMorgan bullish on crypto
Gearing up for Halloween, I bought a hanging zombie doll with long dark hair and vacant eyes. My husband said it might be too much for my kids. On the contrary, it turns out. The eldest has befriended the doll calling it her “BFF” and insisting she says goodbye before school every day. Unbeknownst to me, this doll also has a voice which begins as a soft cry before transitioning a demonic cackle and then requesting her captive audience come closer because “she has a secret to tell.” My daughter pushes it every morning convinced today will be the day the doll will finally tell her what the secret is. I guess she has her mother’s curiosity and her father’s inability to detect an emotionally unstable woman.
Trump trade: Polling data from NBC News to Nate Silver’s 538 to the New York Times all indicate this is a tight race for the presidency between Kamala Harris and Donald Trump. But the markets see it a little different. Polymarket, a decentralized prediction platform in which you can bet on outcomes, has Trump odds at 60%. That’s not the only place the Trump trade is showing up. Shares of Trump Media are up about 6% in the pre-market and have more than doubled in the last 3.5 weeks. Meanwhile an ETF that tracks the solar industry hit the lowest level since 2020 (Invesco’s TAN ETF). While moving mouths say it is a tight race, those putting their money where their mouth is are betting on a decidedly different outcome.
Double Double: Inflation in Canada increased by the slowest pace in three years and 5 of 6 economists at Canada’s major banks now think the Bank of Canada will cut rates by 50 basis points next week. Inflation grew at just 1.6% for September, which was less than economists expected. BMO, which is now calling for a jumbo cut, says inflation has now come in below the Bank of Canada’s target for a second straight quarter while Q3 GDP is tracking well below forecast. Is it any wonder that the big gainers yesterday were all rate sensitive sectors like utilities, real estate and telcos? The Bank of Canada’s next rate decision is Wednesday, October 23rd.
Pick up: Shares of Morgan Stanley are poised to open at a record high after following in the footsteps of the other major banks this earnings season. It was a beat across the board with traders and investment bankers earning their keep. For all the anxiety around CEO transition, Morgan Stanley has done remarkably well under Ted Pick. I thought it curious that the bank lowered provisions for credit losses in part because of “lower provisions for the commercial real estate sector.” Is relief on the way for one of the most stressed-out sectors?
Can’t spell pain without AI: Shares of ASML dropped by the most since 1998 after a profit warning yesterday. The stock is down again this morning after the maker of chipmaking machines said there is weakness beyond AI. Recall, Intel is a large customer and has been struggling recently. Even though the weakness is not related to AI, it took down a bunch of AI darlings from Nvidia to AMD to Palantir. Taiwan Semiconductor could be the deciding factor in which way this is going to go, it reports results tomorrow.
Watch what I do, not what I say: By now Jamie Dimon’s comments on crypto are well known. He doesn’t care for it and he has called Bitcoin as valuable as a pet rock. That hasn’t stopped the folks at JPMorgan from doing work in crypto. In fact just today their team put out a note saying they are bullish on digital assets in 2025. They highlight three main reasons: traditional wealth advisors are allowed to recommend spot bitcoin ETFs to their clients, the bulk of bankruptcy sales are now behind us (from Mt. Gox and Genesis), and that cash payments from the FTX bankruptcy towards the end of the year could be re-invested into crypto. Crytpo investors love to learn the same lesson over again.