Macro Briefing: 6 November 2024

Trump wins election, reshuffling outlook for US economy. The Republican president-elect’s policy views on a number of macro fronts differ sharply from priorities pursued by the Biden administration, including trade, green energy, taxes and several other key areas. The federal government’s deepening budget deficit, which received little if any attention on the campaign trail, will also be a factor in the year ahead. “It was once unthinkable that the US would have almost three years with an unemployment rate around or well below 4% and yet run budget deficits of 6-8% of GDP,” notes Mohamed El-Erian, president of Queens’ College, Cambridge, and an adviser to Allianz and Gramercy. In a possible sign that the bond market will put pressure on the new administration to deal with the deficit, Treasury yields rose to multi-month highs this morning. “We need to watch what happens to bond yields, and there could be a tipping point if US bond yields continue to rise,” says Seema Shah, chief global strategist for Principal Asset Management.

Fed funds futures continue to price in a high probability that the central bank will announce a 1/4 point cut for its target rate in tomorrow’s policy statement. The market is also projecting a moderate degree of confidence for a second cut in December.

Bitcoin surges to record high on Trump win. “The election is having a massive influence on crypto,” says Ryan Rasmussen, head of research at Bitwise Asset Management. “Expect bitcoin – and crypto more broadly – to be choppy in the days ahead … until we have definitive election results.”

US trade deficit widened to two-year high in September. “We expect imports to outpace exports in the short term, as investment in data centers and semiconductors supports capital goods imports and a strong consumer pushes retailers to build out inventories,” says Matthew Martin, senior US economist at Oxford Economics. “The outcome of the election could add upside risk to imports if businesses seek to pre-empt potential tariff increases in the event of a second Donald Trump Presidency.”

The average age of first-time US homebuyers rose to a record high — 38, according to data from the National Association of Realtors (NAR). “The first-time homebuyer who can enter into today’s market is older, has a higher income [and] is wealthier,” says Jessica Lautz, deputy chief economist at NAR, noting that recent rise in home prices requires bigger down payments.

US ISM Services Index increased to a two-year high in October. This survey-based measure of the services sector, the main engine for the US economy, reflects four straight months of accelerating growth: